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Q.3 A firm has two divisions and an overall WACC of 10%. Risky Division has a WACC of 15%. Safe Division has a WACC of

Q.3 A firm has two divisions and an overall WACC of 10%. Risky Division has a WACC of 15%. Safe Division has a WACC of 5%. Safe Division has a new project that is similar to their usual projects. What rate should they use when evaluating the new project?

10% since this is the firm's WACC.

15% since the Safe Division wants to be very cautious.

5% since the project is within the Safe Division

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