What is an estimate of the WACC for computer sales division

Assignment Help Financial Accounting
Reference no: EM132708586

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?

Reference no: EM132708586

Questions Cloud

What criteria be to evaluate whether a merger is successful : Explain why you consider it to have been successful. In general, what do you think the criteria should be to evaluate whether a merger is successful?
Discuss the advantages of the pegged exchange rate : In a critical essay, discuss the advantages and disadvantages of the pegged exchange rate. Indicate the main considerations Saudi Arabia faces from a currency.
What is smith weighted average capital balance : Smith is a partner in the Smith and Jones Partnership.,1/1/20 balance: $300,000. What is Smith's weighted average capital balance?
What is the amount for paid-in capital in excess : On January 1, 2021, a company granted stock options to employees for the purchase of 20,000 shares. What is the amount for Paid-in Capital in Excess
What is an estimate of the WACC for computer sales division : What is an estimate of the WACC for your computer sales division? Your tax rate is 25% and you use a market risk premium of 5.0% in your WACC estimates.
Compute What is Avicorp pre-tax cost of debt : The debt has semi-annual coupons, the next coupon is due in six months. What is Avicorp's pre-tax cost of debt? Note: Compute the effective annual return.
Journalize the entries for the upgrade to delivery truck : Journalize the entries for the upgrade to delivery truck and oil change expenditures. If an amount box does not require an entry, leave it blank.
Determine the units-of-output depreciation for the year : Determine the units-of-output depreciation for the year. Copy equipment was acquired at the beginning of the year at a cost of $63,450
Write off the accounts receivable due from jacob marley : Write off the $4,320 of accounts receivable due from Jacob Marley. If an amount box does not require an entry, leave it blank.

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd