1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
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%

You might be interested in
This is more a question about highschool. What are exams like? I am going into High school next year. so yea
cestrela7 [59]
Are you doing online or going to an actual school?
8 0
3 years ago
Read 2 more answers
A 2 percent increase in the price of milk causes a 6 percent reduction in the quantity demanded of chocolate syrup. What is the
scoray [572]

Answer: the cross-price of elasticity of demand for chocolate syrup with respect to the price of milk would be :

e = % ΔQ chocolate syrup / %ΔP of milk

e = -4% / 2%

e = -2 %

Explanation:

7 0
2 years ago
Suppose the United States can produce either 90 apples and 20 oranges or 80 apples and 30 oranges. What is the opportunity cost
Tju [1.3M]

Answer: The opportunity cost of producing 1 apple will be 1 orange.

Explanation:

Opportunity cost is defined as the loss or cost of another alternative when another alternative is being chosen by an economic agent.

In this scenario, the opportunity cost of producing every additional apple will be 1 orange due to the fact that as there's an increase in the production of apple from 80 to 90, there'll be a reduction in the production of orange from 30 to 20.

This indicates that for the increase of 10 apples, there's a reduction of 10 oranges which implies that an increase of 1 apple brings about a reduction by 1 orange.

5 0
3 years ago
Mr. Morgan earns $38,000 a year as a salesperson and a 5% commission on all his sales. He has a mortgage of $910 a month and pay
Semmy [17]

Answer:

the mortgage.

Explanation:

5 0
3 years ago
Read 2 more answers
A grocery store has three open checkout lanes. On average, 45 shoppers arrive at these lanes per hour. The coefficient of variat
nadya68 [22]

Answer:

A.  

0.833

Explanation:

m = 3

Arrival rate, ra = 45 per hour

Service rate, re = 18 per hour per lane

Utilization factor = ra/(m.re)

                            = 45/(3*18)

                            = 0.833

Therefore, The utilization factor of the system is 0.833

6 0
3 years ago
Other questions:
  • Smiley Corp.'s transactions for the year ended December 31, 2018 included the following:
    9·2 answers
  • Which business document is a contract that defines the tasks, time frame, and deliverables that a vendor must perform for a clie
    8·1 answer
  • Baseball's increasing global popularity may be attributed to
    5·1 answer
  • Money in your emergency fund could be wisely used:
    7·1 answer
  • Penny, a full-time biochemist, loves stock car racing. To feed her passion, she bought a used dirt-track car and has started ent
    14·1 answer
  • Before you started applying for college, a job recruiter offered you a full-time cashier position at a department store, earning
    7·1 answer
  • Which of the following is prepared​ last? A. Balance Sheet B. Statement of​ Owner's Equity C. Trial Balance D. Income Statement
    5·1 answer
  • When a home is constructed, consideration is given to the positioning of the building relative to its surroundings and the sun,
    5·1 answer
  • Which of the following outcomes is not a direct result of a market​ analysis?
    6·1 answer
  • The following units of a particular item were available for sale during the calendar year:
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!