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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
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 0.9, 1.3, 1.4, and 1.5, respectively. Assume all current and future projects will be financed with 25 percent debt and 75 percent equity, the current cost of equity (based on an average firm beta of 1.3 and a current risk-free rate of 6 percent) is 12 percent and the after-tax yield on the company's bonds is 11 percent. What will the WACCS be for each division? (Do not round intermediate calculations. Round your final answers to 2 decimal places.) WACCS Division A Division B Division C % Division D TAFKAP Industries has 2 million shares of stock outstanding selling at $16 per share, and an issue of $12 million in 8.0 percent annual coupon bonds with a maturity of 10 years, selling at 105 percent of par. Assume TAFKAP's weighted average tax rate is 21 percent, it can make full use of the interest tax shield, and its cost of equity is 15.0 percent. What is TAFKAP's WACC? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) WACC
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