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Under what circumstances would it be appropriate for a firm to use different costs of capital for its different operating divisions? If the overall firm
Under what circumstances would it be appropriate for a firm to use different costs of capital for its different operating divisions? If the overall firm WACC was used as the hurdle rate for all divisions, would the riskier division or the more conservative divisions tend to get most of the investment projects? Why? If you were to try to estimate the appropriate cost of capital for different divisions, what problems might you encounter? What are two techniques you could use to develop a rough estimate for each divisions cost of capital?
Under what circumstances would it be appropriate for a firm to use different costs of capital for its different operating divisions?
If the overall firm WACC was used as the hurdle rate for all divisions, would the riskier division or the more conservative divisions tend to get most of the investment projects? Why?
If you were to try to estimate the appropriate cost of capital for different divisions, what problems might you encounter?
What are two techniques you could use to develop a rough estimate for each divisions cost of capital?
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