Question
Problem 11-28 Divisional WACCs (LG11-7) Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions,
Problem 11-28 Divisional WACCs (LG11-7)
| Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.7, 1.3, 1.4, and 1.6, respectively. Assume all current and future projects will be financed with 20 percent debt and 80 percent equity, the current cost of equity (based on an average firm beta of 1.1 and a current risk-free rate of 4 percent) is 14 percent and the after-tax yield on the companys bonds is 9 percent. |
| What will the WACCs be for each division? (Do not round intermediate calculations and round your final answers to 2 decimal places.) |
| WACCs | |
| Division A | % |
| Division B | % |
| Division C | % |
| Division D | % |
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How To Value Buy Or Sell A Financial Advisory Practice
Authors: Mark C. Tibergien, Owen Dahl
1st Edition
1576601749, 978-1576601747
