United Technologies (UT) acquired Rockwell Collins (Rockwell) $30 billion, including $7 billion in assumed Rockwell debt, in late 2017. Rockwell shareholders received $140 per share. The purchase price consisted of $93.33 in cash plus $46.67 in UT stock and represented an 18% premium to Rockwells closing share price the day before the announcement. UTs aerospace business will be combined with Rockwell to create a new business to be called Collins Aerospace Systems. UT anticipates about $300 million annually in cost savings by the fourth year after closing.

Rockwells free cash flow to the firm (FCFF) is projected to be $750 million in 2017, which is expected to grow at 4% annually through 2022 and 2% thereafter. The firms beta is 1.22 and average borrowing cost is 4.8%. The equity risk premium is 5 percentage points. The 10-year Treasury bond rate is 2.2%. The debt-to-equity ratio is 1.39. The firms cost of capital in the years beyond 2022 is expected to be half of one percentage point below its level during the 2018 to 2022 period. The firms marginal tax rate is 40%, and there is no cap on the tax deductibility of net interest expense.

An analyst was asked if UT overpaid for Rockwell. She reasoned that to answer this question, she would have to estimate the standalone value of Rockwell and the present value of synergy. The upper limit on the purchase price should be the sum of the standalone value plus the PV of synergy. If the actual purchase price exceeded the upper limit, the firm would have overpaid for the Rockwell. In effect, UT would have transferred all the value created by combining the two firms (i.e., anticipated synergy) to Rockwell shareholders.

Question: (how do I get the answer as per the below value)

What is the WAAC beyond 2022?

Answer:

WAAC beyond 22 = 4.66%