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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: Dell's beta is 1.21, the? risk-free rate is 4.5%, its market value of equity is $67.0 billion, and it has $700 million worth of debt with a yield to maturity of 6.0%. Your tax rate is 25% and you use a market risk premium of 5.0% in your WACC estimates.
Problem a. What is an estimate of the WACC for your computer sales division?
Problem b. If your overall company WACC is 12.0% and the computer sales division represents 40% of the value of your firm, what is an estimate of the WACC for your software division?
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They state it is not needed because the organization has already decided to fund the project.
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Question 4 Calculate a table of interest rates based on the following information: Inflation expectations for year 1 = 3%, year 2 =3.5%, years 3-5 =5% The default risk is .1% for year one and increases by .2% over each year Liquidity premium is 0 for..
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In September 1996, Anne hired J.P. Suisse, a top tier investment bank, to take Scanlon Technologies public. On January 1, 1997, the company, which was authorized by the State of Delaware to sell 20 million common stock and 10 million preferred stock,..
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