Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 14, Problem 18P

In mid-2015 Qualcomm Inc. had $11 billion in debt, total equity capitalization of $89 billion, and an equity beta of 1.43 (as reported on Yahoo! Finance). Included in Qualcomm’s assets was $21 billion in cash and risk-free securities. Assume that the risk-free rate of interest is 3% and the market risk premium is4%.

  1. a. What is Qualcomm’s enterprise value?
  2. b. What is the beta of Qualcomm’s business assets?
  3. c. What is Qualcomm’s WACC?
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In mid-2015, Cisco Systems had a market capitalization of $124 billion. It had A-rated debt of $23 billion as well as cash and short-term investments of $60 billion, and its estimated equity beta at the time was 1.24. a. What is Cisco's enterprise value? b. Assuming Cisco's debt has a beta of zero, estimate the beta of Cisco's underlying business enterprise.
Assume Bismuth Electronics has a book value of $6 billion of equity and a face value of $19.7 billion of debt. The market values of equity and debt are $2.5 billion and $18.5 billion. A Wall Street financial analyst determines values of equity and debt as $3 billion and $20 billion. Which of the following values should be used for calculating the firm's WACC? A) $6 billion of equity and $19.7 billion of debt B) $2.5 billion of equity and $20 billion of debt C) $3 billion of equity and $19.9 billion of debt D) $2.5 billion of equity and $18.5 billion of debt

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Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book

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