You are asked to calculate a food corporation's cost of capital for different division. This corporation...

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You are asked to calculate a food corporation's cost of capital for different division. This corporation has three divisions of restaurant, snack food and beverages. Information on each division's beta, cost of capital (Kg) raised from debt and its targeted equity and debt ratios (WE and Wa) respectively are given in the following table. The tax rate for this corporation is 35%. The risk free rate (K) is 3% and return on market portfolio (Km) is 12%. Calculate the divisional weighted average cost of capital (WACC) for corporation's restaurant, snack, and beverage. Division Pretax Cost of Beta Debt Debt Ratio Targeted Targeted Equity Ratio Restaurant 9% 1.20 40% Snack Food 8.5% 0.95 70% Beverages 8% 1.5 50% 60% 30% 50% You are asked to calculate a food corporation's cost of capital for different division. This corporation has three divisions of restaurant, snack food and beverages. Information on each division's beta, cost of capital (Kg) raised from debt and its targeted equity and debt ratios (WE and Wa) respectively are given in the following table. The tax rate for this corporation is 35%. The risk free rate (K) is 3% and return on market portfolio (Km) is 12%. Calculate the divisional weighted average cost of capital (WACC) for corporation's restaurant, snack, and beverage. Division Pretax Cost of Beta Debt Debt Ratio Targeted Targeted Equity Ratio Restaurant 9% 1.20 40% Snack Food 8.5% 0.95 70% Beverages 8% 1.5 50% 60% 30% 50%

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