Question
Swizer industries has two separate divisions. Division X has less risk so its projects are assigned a discount rate equal to the firms WACC minus
Swizer industries has two separate divisions. Division X has less risk so its projects are assigned a discount rate equal to the firms WACC minus 3 percent. Division Y has more risk and its projects assigned a rate equal to the firms WACC plus 4 percent. The company has a debt equity ratio of .55 and a tax rate of 30 percent. The cost of equity is 11.67 percent and the after-tax cost of debt is 5.0 percent. Presently, each division is considering a new project. Division Ys project provides a 12.0 percent rate of return and division Xs project provides a 7.0 percent return. Calculate the companys WACC (rounded to the nearest tenth percent).
Group of answer choices
12.3 percent
9.3 percent
13.3 percent
6.3 percent
5.3 percent
Given the information in the previous problem calculate the project WACC for division X.
Group of answer choices
12.3 percent
9.3 percent
13.3 percent
6.3 percent
5.3 percent
Given the information in the previous problem calculate the project WACC for division Y.
Group of answer choices
12.3 percent
9.3 percent
13.3 percent
6.3 percent
5.3 percent
Question 185 pts
Given the information in the previous problem, which projects, if any, should the company accept?
Group of answer choices
You should accept Project X but not Project Y
You should accept Project Y but not Project X
You should accept Project Y but you are indifferent about project X
You should accept neither Project X nor Project Y
You should accept both Project X and Project Y
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