Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Apple Inc. (AAPL) is a consumer electronics company with 3.95B shares outstanding cur- rently trading at $177.06 per share. They also have 118m annual coupon

Apple Inc. (AAPL) is a consumer electronics company with 3.95B shares outstanding cur- rently trading at $177.06 per share. They also have 118m annual coupon bonds selling in the market for $101.37 each and a coupon rate of 4%. They mature in 10 years. Assume Apple will maintain their current capital structure. They are interested in fabricating their own chips for their Mac computer line. While Apple has an equity beta of 1.01, Intel (INTC), a computer chip fabricator, has an equity beta of 0.62. INTC has a debt to value ratio of 31% and has a similar cost of debt as AAPL. The risk free rate is 1.9%, the expected market return is 6.8%, and the corporate tax rate is 35% for all firms. You can assume the cost of debt stays constant in the future. What is Apples weighted average cost of capital (WACC) for this project (answer in decimal, not percent)?

I have the answers I just don't understand how you get the d/e for the Re of apple

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Listed Volatility And Variance Derivatives

Authors: Yves Hilpisch

1st Edition

1119167914, 978-1119167914

More Books

Students also viewed these Finance questions