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Assume a company has two divisions, A and B, and it wants to know the WACC for each division separately Unlevered industry beta for division
Assume a company has two divisions, A and B, and it wants to know the WACC for each division separately
Unlevered industry beta for division A = 0.5
Unlevered industry beta for division B = 0.7
Company tax rate = 20%
Debt proportion for division A = 67%
Debt proportion for division B = 34%
Cost of debt (before taxes) for division A = 5%
Cost of debt (before taxes) for division B = 8%
T-Bill return = 2% and EMRP = 7%
What is the WACC for each division?
Divsion A _____________
Division B _____________
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