Question
Techie Technology Company (TTC) is a publicly traded technology company that specializes in the creation and maintenance of finance and accounting software programs for a
Techie Technology Company (TTC) is a publicly traded technology company that specializes in the creation and maintenance of finance and accounting software programs for a variety of specialty areas. These areas include real estate management, the medical field, and education. Each software package is tailored to meet the needs of the particular industry for the client. The company is currently evaluating its current capital structure, as well as the tax implications of this structure. The company is considering numerous changes to its capital structure. These changes include issuing new stock to pay back debt, attaining new debt to buy back stock equity, and the tax impacts of each decision. Information on the different scenarios is outlined below.
TTC wants to gain a starting point as to where they are currently. As of today, the company has $3.2 billion in debt, total equity capitalization of $51 billion, and an equity beta of 1.26. Included in TTC's assets are $14.6 billion in cash and risk free securities. The company is currently is experiencing a risk free rate of interest at 4% and a market risk premium of 5%. Based on this information, address the questions below.
What is TTC's enterprise value?
What is the beta of TTC's business assets?
What is the WACC of TTC?
Please show formulas how you got to the answers.
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