Sources and Uses of Cash (in US$ Millions) Uses of Cash Sources of Cash Capital Expenditures Working Capital $ 621.50 $ 18.50 Equity AES Other $ 175.00 $ 25.00 Debt IFC A Loans IFC B Loans ECA $ 140.00 $ 150.00 $ 150.00 Total Uses $ 640.00 Total Sources $ 640.00

Answer:-

12 months LIBOR Rate = 0.334% (as on 18/12/2020)

Cost of IFC A-loans =LIBOR rate +450 Basis Points

=0.334%+4.50%

=4.834%

Cost of IFC B loans =LIBOR Rate + 450 Basis Points

=0.334% +4.5%

=4.834%

Debt to Equity Ratio = Debt/equity

=440/200

=2.2

As there is Cost of equity provvided in the question, we can find the cost of equity from Debt to equity ratio.

As the ratio between debt and equity in the cost of capital calculation should be the same as ratio between a company's total debt financing and its total equity financing. In another words, the cost of capital should correctly balance the cost of debt and cost of equity.

As there is only debt and equity in our question, so we can easily find the cost of equity from debt equity ratio.

Weighted Cost of debt is equal to

Cost of Debt/cost of equity = Debt to equity Ratio

i.e. 2.2 = cost of Debt/cost of equity

2.2 =5.16/cost of equity

Cost of equity = 5.16/2.2

Cost of Equity = 2.345

Computation of WACC