Your company has twodivisions: One division sells software and the other division sells computers through a direct saleschannel, primarily taking orders over the internet. You have decided that Dell Computer is very similar to your computerdivision, in terms of both risk and financing. You go online and find the followinginformation: Dell's beta is 1.17, therisk-free rate is 4.7%, its market value of equity is $65.6 billion, and it has $693 million worth of debt with a yield to maturity of 5.9%. Your tax rate is 35% and you use a market risk premium of 5.7% in your WACC estimates.

a. What is an estimate of the WACC for your computer salesdivision?

b. If your overall company WACC is 12.6% and the computer sales division represents 40% of the value of yourfirm, what is an estimate of the WACC for your softwaredivision?

Note: Assume that the firm will always be able to utilize its full interest tax shield.