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(c) Using an inappropriate discount rate is a common cause of mistakes in capital budgeting. If a company wanted to set up a new division

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(c) Using an inappropriate discount rate is a common cause of mistakes in capital budgeting. If a company wanted to set up a new division in an area unrelated to its normal line of business, outline the steps that the company should take to establish a correct discount rate for the project. (6 marks)

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