What is an estimate of the wacc for software division

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Your company has two division: One division sells software and the other division sells computers through a direct sales channel, primarily hking orders over the intemet. You have decided that Hewlett Packard is very similar to your computer division, in terms of both risk and ?nancing. You go online and ?nd the following information: Hewlett Packard's beta is 1.19, the risk-free rate is 4.7%, its market value of equity is $67.4 billion, and it has $695 million worth of debt with a yield to maturity of 5.9%. Your tax rate is 22% and you use a market risk premium of 5.7% 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 11.3% and the computer sales division represents 38% of the value of your ?rm, what is an estimate of the WACC for your software division?

Reference no: EM132793127

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