A firm has three divisions of equal size: a high-risk division, an average-risk division, and a low-risk
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A firm has three divisions of equal size: a high-risk division, an average-risk division, and a low-risk division. Firms in the same industry as the high-risk division have a WACC of 14%, firms in the same industry as the average-risk division have a WACC of 11%, and firms in the same industry as the low-risk division have a WACC of 8%. The overall firm WACC is 11%.
calculate What would happen if the CFO used 11% as the discount rate for all projects in the firm?
Related Book For
Managerial accounting
ISBN: 978-0471467854
1st edition
Authors: ramji balakrishnan, k. s i varamakrishnan, Geoffrey b. sprin
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