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For the most recent fiscal year, book value of long-term debt at Schlumberger was $11962 million....

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Finance

For the most recent fiscal year, book value of long-term debt atSchlumberger was $11962 million. The market value of this long-termdebt is approximately equal to its book value. Schlumberger’s shareprice currently is $59.03. The company has 1,000 million sharesoutstanding. Managers at Schlumberger estimate that the yield tomaturity on any new bonds issued by the company will be 8.46%.Schlumberger’s marginal tax rate would be 35%. Schlumberger’s betais 0.89. Suppose that the expected return on the market portfoliois 8% and the risk-free rate is 2%. Assume that the company willnot change its capital structure. Also assume that the businessrisk of the projects under consideration is about the same as thebusiness risk of Schlumberger as a whole. What would Schlumberger’safter-tax WACC be, given this information? Do not round atintermediate steps in your calculation. Express your answer inpercent. Round to two decimal places. Do not type the % symbol.

Answer & Explanation Solved by verified expert
4.5 Ratings (894 Votes)
Schlumbergers aftertax Weighted Average Cost of Capital WACC Market Value capital structures Market Value of Debt 11962 Million Market Value of Equity 59030 Million 1000 Million shares x 5903    See Answer
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