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A firm has a three divisions, Division 1, Division 2, and Division 3. Divisions 1 and 2 represent 27% and 26% of the firm's value,
A firm has a three divisions, Division 1, Division 2, and Division 3. Divisions 1 and 2 represent 27% and 26% of the firm's value, respectively. The firm's WACC is 8.5%, Division 1's WACC is 10.8%, 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 2.5%, and the Market Risk Premium is 6.9%, what is the WACC of Division 3?
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