Question
11-27 Divisional WACCs: Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through
11-27 Divisional WACCs: Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.6, 1.0, 1.3 and 1.6 respectively. If all current and future projects will be financed with half debt and half equity and if the current cost of equity (based on the average firm beta of 1.0 and a current risk free rate of 7 percent) is 13 percent and the after-tax yield on the companys bond is 8 percent, what will the WACCs be for each division?
Answer this question using Excel
and show work, please
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