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Colt Manufacturing has two divisions: 1) pistols; and 2) rifles. Betas for the two divisions have been determined to be beta (pistol) = 0.6 and
Colt Manufacturing has two divisions: 1) pistols; and 2) rifles. Betas for the two divisions have been determined to be beta (pistol) = 0.6 and beta (rifle) = 0.7. The current risk-free rate of return is 5%, and the expected market rate of return is 11.5%. The after-tax cost of debt for Colt is 5.5%. The pistol division's financial proportions are 45.0% debt and 55.0% equity, and the rifle division's are 55.0% debt and 45.0% equity. What is the pistol division's WACC? What is the rifle division's WACC? What is the pistol division's WACC? % (Round to two decimal places.) What is the rifle division's WACC? % (Round to two decimal places.)
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