CNT Ltd is a telecommunication company. In 2018, the company plans to expand its business into transport industry by adding a transport division. The new division will be financed in the same way as CNT. Which of the following methods is the most appropriate to value this project?

Select one:

a. Discount the division FCF at a benchmark WACC, which reflects the business risk of the division only.

b. Discount the division FCF at CNT’s levered cost of equity

c. Discount the division FCF at CNT’s unlevered cost of equity

d. Discount the division FCF at a benchmark WACC, which reflects both the business risk and the financial risk of the division.

e. Discount the division FCF at CNT’s existing after-tax WAC

Answer rating: 100% (QA)

c Discount the division FC F at C NT s unle vered cost of equity Discounting the division FCF ... View the full answer