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Trava [24]
3 years ago
14

In mid-2015, Qualcomm Inc. had $13 billion in debt, total equity market value of $87 billion and an equity beta of 1.41. Include

d in Qualcomm’s assets was $21 billion in cash and risk-free securities. Assume that the risk-free rate of interest is 2.9% and the market risk premium is 3.9%.
Business
1 answer:
lesya692 [45]3 years ago
8 0

Answer:

A) Qualcomm's enterprise value= $95 billion

B) Asset Beta of Qualcomm’s business = 1.29

C) Qualcomm's WACC= 7.931%

Explanation:

The question relates to Capital asset pricing model (CAPM) which is used to calculate the required return from an investment given the level of risk associated with the investment. Now there are many risk that the level of cash flows and hence the required return from an investment such as systematic and unsystematic risks, business and finance risks etc.

The requirements of the question are as follows:

a)What is Qualcomm’s enterprise value?

b)What is the beta of Qualcomm’s business assets?

c)What is Qualcomm’s WACC?

The first two requirements will help us compute requirement C so we begin solving it form A as follows:

A) Qualcomm's enterprise value= ve- vd +va

ve= value of equity

vd= value of debt

va= value of asset

Qualcomm's enterprise value= $87b - $13b +$21b

Qualcomm's enterprise value= $95 billion

B) Beta of Qualcomm’s business assets:

Now beta is an index used to measure systematic risks (risks posed by macro-economic factors such as tax, interest rates etc). There are two beta indexes, asset beta and equity beta. Asset beta measures business risks only and equity beta measures both business and finance risks. In the question we already have equity beta so we need to calculate asset beta in order to compute Qualomm's WACC.

ba = be× ve/enterprise value

ba = asset beta

be= equity beta

ba= 1.41× $87÷$95

Beta of Qualcomm's business= 1.29

C) Qualcomm’s WACC:

The formula is as follows:

Ke= Rf + (market premium)× ba

ke = WACC

Rf= risk free rate of interest

ba= asset beta

ke= 2.9% + (3.9% ×1.29)

ke/WACC= 7.931%

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Turner Inc. produces two products P1 and P2. The company has provided you with the following information. Assume that the curren
Nesterboy [21]

Answer:

B. The operating leverage for Turner now is 0.47  ⇒ TRUE

operating leverage = fixed costs / total costs = $240,000 / $510,000 = 0.47

C. Turner makes a contribution of $0. 57 per dollar of revenue, on the average.  ⇒ TRUE

total contribution margin = ($20 x 9,000) + ($30 x 6,000) = $180,000 + $180,000 = $360,000

total revenue = $630,000

contribution margin per $ of revenue = $360,000 / $630,000 = $0.57

D. Turner will break even when it reaches a revenue of $420,000.  ⇒ TRUE

break even point in $ = (6,000 x $30) + (4,000 x $60) = $180,000 + $240,000 = $420,000

Explanation:

A. 40% of Turner's revenue comes from P2  ⇒ FALSE

total revenue = $270,000 + $360,000 = $630,000

revenue from P2 = $360,000, which represents 57.14% of total revenue

E. The breakeven volume for Turner is 9,334 units ⇒ FALSE

in order to calculate break even point, we can prepare a bundle of products = 3P1 + 2P2

contribution margin per bundle = $120

break even point = $240,000 / $120 = 2,000 bundles

6,000 P1 and 4,000 P2

7 0
2 years ago
According to a survey of American households: The probability that a household owns 2 cars, if annual income is over $25,000, is
vladimir1956 [14]

Answer: 0.48

Explanation:

P(A/B) = P(AnB)/P(B) where:

P(A/B) = The probability of event A occurring given that B has occurred.

P(AnB) = The probability of both events A and B occurring.

P(B) = the probability that event B occurs.

So let

P(A) = Probability that the residents of a household own 2 cars.

P(B) = Probability that the annual household income is greater than $25,000.

The question tells us that

P(A/B) = 0.8

Note that: P(A) = 0.7, P(B) = 0.6.

Since we want to work out P(AnB), because it gives the probability that residents have an annual household income over $25,000 and own 2 cars.

We would Rearrange our initial equation to make P(AnB) the subject formula becoming;

P(A/B) = P(AnB)/P(B)

P(B)*P(A/B) = P(AnB)

So, inserting our probabilities into this equation gives:

0.6*0.8 = 0.48

8 0
2 years ago
Carlos Company had beginning inventory of $80,000, ending inventory of $110,000, cost of goods sold of $285,000, and sales reven
DerKrebs [107]

121.67 days

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365 days / ($285,000 / (80000+110,000)/2))

365 / (285,000 / {190,000/2})

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365/3 = 121.67 (rounded)

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Answer:

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rjkz [21]

Answer:

Efficient market school.

Explanation:

Efficient market school is the market school which argues that forward exchange rates do the best possible job for forecasting future spot exchange rates, so investing in exchange rate forecasting services would be a waste of time because it is impossible to have a consistent alpha generation on a risk adjusted excess returns basis as market prices are only affected by new informations.

The efficient market school also known as the efficient market hypothesis (EMH) is a hypothesis that states that asset (share) prices reflect all information and it is very much impossible to consistently beat the market.

Also, forward exchange rates are exchange rates controlling foreign exchange transactions at a specific future date or time.

<em>Hence, according to the efficient market school it would be a waste of time investing in exchange rate forecasting services because all the information about an asset or security is already factored into their prices and as a result of the randomness of the market. </em>

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