Panda ab manufactures and sells ecological cotton fleece, Financial Management

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Panda ab manufactures and sells ecological cotton fleece

Panda AB manufactures and sells ecological cotton fleece and is expected to have a free cash flow of 10 million SEK during next year. This cash flow is expected to grow by 4% from next year and onwards. Panda AB currently has a cost of equity of 13%, a cost of debt of 6 % (before tax) and they pay 35% of their profits in taxes. Assume that Panda AB has a debt-to-equity-ratio of 50% and that they are planning to keep this ratio constant in the future.

a) What is the WACC before tax for Panda?

b) What would have been the value of Panda if they had no debt?

c) What is the value of Panda’s tax shield?

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Financial Management: Panda ab manufactures and sells ecological cotton fleece

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Financial Management: Panda ab manufactures and sells ecological cotton fleece

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