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Follow this working but use the numbers that are given in the question !!!, This working is for another question with same working but different
Follow this working but use the numbers that are given in the question !!!, This working is for another question with same working but different numbers. PLEASE BE VERY CAREFUL AND ACCURATE. HERE IS THE QUESTION TO BE SOLVED will upvote if figures are accurate and correct.
1) Use beta of OnlyHams (pure play) to find RE RE=rf+(beta*rpm)=0.043+0.690.093=10.717% 2) Find WACC using the capital structure weights of OnlyHams (assuming that InstaHam's new division is being financed in the same way): WACC=(WDRD(1TC))+(WERE)=0.090.071(10.4)+(0.910.10717)=10.14% A correct answer is 10.14 , which can be typed in as follows: 10.14 The firm recently created a new internal division focused on extracting revenue more directly from its users through a combination of premium honey-glazed bacon subscription and bespoke PPH (pay-per-ham) services. You have collected the following data for InstaHam and for another firm, OnlyHams, which you believe to be a firm similar in characteristics to this new division and that specializes only in that premium subscription / PPH market: Assume that InstaHam plans to finance 10.00% of the new division with debt and the rest with equity. Assume a cost of debt of 6.60%, a risk-free rate of 4.00%, and a market risk premium of 8.50%. A) What is the Weighted Average Cost of Capital (WACC) that the new division of InstaHam should use when evaluating projects in the new subscription / pay-per-ham division? (Round your answer to 2 decimal places)Step by Step Solution
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