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malfutka [58]
4 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]4 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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3 years ago
If the print media is taken over by the electronic media, thereby causing employees in the print media industry to be permanentl
Brrunno [24]

Answer:

Structural

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5 0
3 years ago
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D

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4 0
3 years ago
Read 2 more answers
Builtrite Furniture just paid an annual dividend of $2.50 last week and investors' believe that dividends will continue to grow
Ivenika [448]

Answer:

r = 11.55%

Explanation:

Given that,

Annual dividend paid last week, D1 = $2.50

Dividend growth rate, g = 8%

current price of common stock = $76

Stock price = D1 ÷ (r - g)

$76 = [$2.50 × (1 + 8%)] ÷ (r - 8%)

$76 = 2.7 ÷ (r - 8%)

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4 years ago
Beginning January 1, Community Hospital had 150 inpatient beds. On July 1, the bed count was increased to 200. From January 1 to
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A=167.74

B 96.15%

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D 1.02 days

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Average daily census = 61226/365=167.74

B) Bed occupancy rate for January - June 3.

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