Qualcomm is looking to invest in a project. To do this, they require capital and they are concerned about how much it will cost to raise this capital. Currently, the company has 16.24 million Class A shares and 80.13 million Class B shares, they are priced at $60.02 and $52.18 per share respectively. The company also has 3 types of bonds still outstanding a bond with a YTM of 3.00% at a market value of $1003.18 million, another with a YTM of 4.85% with a market value of $2016.26 million, and finally a third with a YTM of 10.00% with a market value of $1921.36 million. The risk free rate of the market is 3.15%, and the market risk premium is 2.36%. The beta of Qualcomm is .98 and the tax rate is 36.10%. What is the company's cost of capital?

 Part B: the three projects are expansion projects that require varying investment totals. The first project costs $435000.00 and would generate a yearly profit of $76000.00 and will last for 9.00 years. The second project costs $498000.00 but will generate a yearly profit of $84000.00 and will last for 11.00 years. Finally, the third project will cost $598000.00, generate a yearly profit of $89000.00 and will last for 16.00 years. The CFO wants your help in determining which project to choose. Which project is the best investment for Qualcomm?

Answer rating: 100% (QA)

To calculate the cost of capital for Qualcomm we need to consider the weighted average cost of capital WACC which is the weighted average of the cost ... View the full answer