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Assume that your firm consists of Division 1 ( 3 5 percent of the firm ) and Division 2 ( 6 5 percent of the

Assume that your firm consists of Division 1(35 percent of the firm) and Division 2(65 percent of the firm). The capital structure for each of the divisions is the same as for the firm as a whole, 50.0 percent debt, at a before-tax cost of debt of 5.4 percent, and 50.0 percent equity. Also assume that the firm calculates the cost of equity for each division using a divisional beta, where Division 1 has an unlevered beta of 1.00, while Division 2 has an unlevered beta of 1.50. Finally assume that the risk-free rate is 4.0 percent and the expected return on the market is 15.0 percent [the firm uses CAPM for required returns]. Given this information, determine the average corporate-wide WACC for this firm. Use a tax rate of 40%.
14.40%
15.50%
15.28%
15.19%
15.06
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