Question
A firm has a three divisions, Division 1, Division 2, and Division 3. Divisions 1 and 2 represent 22% and 27% of the firm's value,
A firm has a three divisions, Division 1, Division 2, and Division 3. Divisions 1 and 2 represent 22% and 27% of the firm's value, respectively. The firm's WACC is 8.3%, Division 1's WACC is 10.1%, and Division 2's WACC is 6.7%. Neither the divisions, nor the firm as a whole have any debt or preferred stock (i.e.: their capital structures are pure equity). If the risk free rate is 2.9%, and the Market Risk Premium is 6.6%, what is the WACC of Division 3? Enter your answer as a percentage, without the percent '%' sign, and rounded to 1 decimal.
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