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malfutka [58]
3 years ago
8

Your company has two​ divisions: One division sells software and the other division sells computers through a direct sales​ chan

nel, 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.
Business
1 answer:
sweet-ann [11.9K]3 years ago
4 0

Answer:

Explanation:

a) WACC of computer sales division:

Cost of equity = 4.3%+1.18×5.9%

=11.262%

WACC =(65300/(65300+705))×11.262%+(705/(65300+705))×6.2%×(1-35%)

=0.99*11.262% + 0.01*6.2%*0.65 = 11.15%+0.0403% = 11.2%

b. 12.5% = 43%×11.2%+57%×WACC (software div)

12.5% = 481.6% + 57%WACC

57%WACC = 469.1%

WACC (software division) = 8.23%

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Implementing the closure process includes several _______ activities, including getting delivery acceptance from the customer.
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The implementation phase is simply known as the stage where a person along with one's project team actually do the project work to produce the deliverables. Implementing the closure process includes several wrap up activities, including getting delivery acceptance from the customer.

  • The implementation phase in any closure process entails putting the project plan into action.

The project manager often coordinate and direct project resources to align with the objectives of the project plan.

  • The closing phase of project management is known as the final phase of the project lifecycle.

This process makes sure that work is completed based on to the project plan and scope.

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5 0
3 years ago
When explaining credit to a friend, which of the philosophy can you use?
tatiyna

Buy now, pay later is the Philosophy that i will use when explaining about credit to a friend

Explanation:

  • <u>The philosophy of the credit card is based on the credit cycle.(</u><u>i.e Buy Now,Pay Later)</u>
  • That means that if you don't  have cash-in -hand then you only need to make payment through credit card and then when you have money the amount spend gets debited from your bank Account.
  • The credit card follows a 50 days credit cycle
7 0
3 years ago
Henry has a $10,000 car insurance policy with a $400 per claim deductible. Henry is involved in an accident, and his car sustain
Sidana [21]
$400. He is only responsible for the deductible. His insurance covers up to $10000 in damage
5 0
3 years ago
On May 27, Buzz Off Inc. reacquired 5,500 shares of its common stock at $23 per share. On August 3, Buzz Off sold 3,200 of the r
ElenaW [278]

Answer:

May 27

Dr Treasury Stock $126,500

Cr Cash $126,500

Aug. 3

Dr Cash $83,200

Cr Treasury Stock $73,600

Cr Paid-in Capital from Sale of Treasury Stock $9,600

Nov. 14

Dr Cash $50,600

Dr Paid-in Capital from Sale of Treasury Stock $2,300

Cr Treasury Stock $52,900

Explanation:

Preparation for the Journal entries for Buzz Off Inc

May 27

Dr Treasury Stock $126,500

(5,500 × $23)

Cr Cash $126,500

Aug. 3

Dr Cash $83,200

(3,200 × $26)

Cr Treasury Stock $73,600

(3,200 × $23)

Cr Paid-in Capital from Sale of Treasury Stock $9,600[3,200 × ($26 – $23)]

Nov. 14

Dr Cash $50,600

($5,500-$3,200 × $22)

Dr Paid-in Capital from Sale of Treasury Stock $2,300

[$5,500-$3,200 × ($23 – $22)

Cr Treasury Stock $52,900

(2,300 × $23)

3 0
3 years ago
People who might need to retrieve part or all of their investment relatively soon, such as the elderly, are often advised to inv
jeyben [28]

Answer: C. While stocks have a higher rate of return in the long run, they are much more volatile (riskier) in the short run. As such, they have a higher probability of having less than the original value of the investment for people who might need to withdraw the investment in the short run.

Explanation:

As stated, people who need to withdraw part or all of their investments in a short time frame such as the elderly are advised to invest in bonds as opposed to stock.

To properly benefit from Stock ownership, one has to be willing to leave it for a long period of time because stocks are more volatile in the short run. If a person needs to withdraw in a short horizon and goes in on Stock, they may lose some of their money due to Capital losses if the Stock reduces in value.

Bonds on the other hand will give a steady income so that even if you wish to withdraw in a short time, you can with the probability of no losses in that short time frame.

7 0
3 years ago
Read 2 more answers
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