A) Given the above information, what is the WACC of OcuPal's hardware division (Anduril)? (Round this answer to 2 decimal places, but use the unrounded answer if any subsequent calculations that require it) B) If OcuPal's overall company WACC is 13.80% and the Anduril division represents 75.00% of the firm's total value, then what should be the WACC for the Palantir SaaS division? (Round your answer to 2 decimal places)
A) Given the above information, what is the WACC of OcuPal's hardware division (Anduril)? (Round this answer to 2 decimal places, but use the unrounded answer if any subsequent calculations that require it) B) If OcuPal's overall company WACC is 13.80% and the Anduril division represents 75.00% of the firm's total value, then what should be the WACC for the Palantir SaaS division? (Round your answer to 2 decimal places)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:OcuPal is a firm that has two divisions: One division (Palantir) sells SaaS (software as a service) products and the other division (Anduril) sells hardware to government clients. You have decided
that Raytheon is a firm that is very similar to OcuPal's hardware division in terms of both risk exposure and capital structure.
You have found the following information about Raytheon online:
Raytheon's beta is 0.80, the risk-free rate is 4.40%, its market value of equity is $20.1 billion, and it has $923.7 million worth of debt that currently trades with a YTM of 5.60%. The corporate
tax rate is 35.0% and the market risk premium is 9.60%.
A) Given the above information, what is the WACC of OcuPal's hardware division (Anduril)?
%
(Round this answer to 2 decimal places, but use the unrounded answer if any subsequent calculations that require it)
B) If OcuPal's overall company WACC is 13.80% and the Anduril division represents 75.00% of the firm's total value, then what should be the WACC for the Palantir Saas division?
%
(Round your answer to 2 decimal places)
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