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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: Del's beta is 1.22. the risk-free rate is 44%, its market value of equity is S67.7 billion. and it has $695 million worth of debt with a yield to maturity of 5, 9%. Your tax rate is 38% and you use a market risk premium of 5.8% in your WACC estimates. a. What is an estimate of the WACC for your computer sales division? b. your overall company WACC is 11.4% and the computer sales division represents 43% of the value of your firm, what is an estimate of the WACC for your software division?
a. What is an estimate of the WACC for your computer sales division? The weighted average cost of capital for your computer sales division is %
b. Your overall company WACC is 4% and the computer sales division represents 43% of the value of your firm, what is an estimate of the WACC for your software division? The WACC for your software division is %.
ALUM, Inc. uses high-tech equipment to produce specialized aluminum products for its customers. Each one of these machines costs $1,520,000 to purchase plus an additional $48,000 a year to operate. The machines have a five-year life after which they ..
Pension funds pay lifetime annuities to recipients. If a firm will remain in business indefinitely, the pension obligation will resemble a perpetuity. Suppose, therefore, that you are managing a pension fund with obligations to make perpetual payment..
As our lecture states, technology can help in all departments of a company. Pick one department (i.e., Accounting, Operations, Finance, and so forth) and give a concrete example of how utilizing a software or hardware solution can improve the efficie..
Assume that you have just been hired by Adams, Garitty, and Evans (AGE), a consulting firm that specializes in analyses of firms’ capital structures. Your boss has asked you to examine the capital structure of Campus Deli and Sub Shop (CDSS), which i..
How do I calculate expected return rate on stocks?
In an efficient market, any abnormal returns with respect to an unpredictable event will drift for a while.
An adjustable rate mortgage is offered with an initial interest rate of 7.00%. What is the size of the "teaser"?
You are going to receive $7,000 at the end of each quarter for the next eight years. What is the present value of these payments at a discount rate of 9 percent, compounded quarterly?
Braam Fire Prevention Corp. has a profit margin of 9.70 percent, total asset turnover of 1.41, and ROE of 18.61 percent. What is its firm's debt-equity ratio? Format to 4 decimal places. 0.36 0.40 0.73 0.32 0.03
What APR is being earned on a deposit of $5,000 made 10 years ago today if the deposit is worth $9,948.94 today? The deposit pays interest semi-annually.
The risk-free rate is 8 percent, and the expected market risk premium is 8.3 percent. Should USR undertake the project?
Clancey Inc. issues $2,155,700 of 7% bonds due in 13 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 12%. What amount will Clancey receive when it issues the bonds?
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