Your company has two divisions: One division sells software and the other division sells computers through a direct sales channel, primarily taking orders over the internet. You have decided that Dell Computer is very similar to your computer division, in terms of both risk and financing. You go online and find the following information: Dell's beta is 1.16 , the risk-free rate is 4.3 % , its market value of equity is $ 65.3 billion, and it has $ 705 million worth of debt with a yield to maturity of 6.2 %. Your tax rate is 35 % and you use a market risk premium of 5.9 % in your WACC estimates. a. What is an estimate of the WACC for your computer sales division? b. If your overall company WACC is 12.5 % and the computer sales division represents 43 % of the value of your firm, what is an estimate of the WACC for your software division? Note: Assume that the firm will always be able to utilize its full interest tax shield.
Answers (1)
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Your company has two divisions: One division sells software and the other division sells computers through a direct sales channel, ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
The Andrews company currently has the following balances in their equity accounts: Common Stock $17,081 Retained earnings $98,561 Suppose next year the Andrews company generates $46,300 in Net Profit, and declares and pays $16,000 in Dividends.
Answers (1)
A lawnmower manufacturer estimates that the probability of a fatal accident caused by the design of its product is 1/10,000 and that the value of a life lost is $1 million.
Answers (1)
Before beginning an advertising campaign for its new Snickers Charged candy bar, the Mars Company had to determine if the product's 60 milligrams of caffeine would lead to initial purchases and brand loyalty.
Answers (1)
On April 1, 2018, Austere Corporation issued $370,000 of 11% bonds at 106. Each $1,000 bond was sold with 40 detachable stock warrants, each permitting the investor to purchase one share of common stock for $15.
Answers (1)
An example of an intangible asset is Question 8 options: land. a building. assembly cost. a patent.
Answers (1)
New Questions in Business
Beswick company your team is allocated a project involving a major client, the beswick company. although the organization has many clients, this client, and project, is the largest source of revenue and affects the work of several other teams in the
Answers (1)
What is mean't by a focus group
Answers (2)
Manufacturers follow four steps to implement a manufacturing overhead allocation system. what is the first step?
Answers (1)
The budgeted production of Capricorn, Inc. is 13 comma 000 units per month. Each unit requires 40 minutes of direct labor to complete. The direct labor rate is $ 100.00 per hour. Calculate the budgeted cost of direct labor for the month.
Answers (1)
If the price level doubled in a 23-year period, we can conclude that the average annual rate of inflation over that period was about 3 percent. a) true b) false
Answers (1)