Northern Conglomerate has two divisions, Division A and Division B . Northern looks at competing pure -

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Northern Conglomerate has two divisions, Division A and Division B

.

Northern looks at competing pure

-

play firms to estimate the betas of each of the two divisions. After this analysis, Northern concludes that Division A has a beta of

0.8

and Division B has a beta of

1.5 .

The two divisions are the same size. The risk

-

free rate is

5

percent and the market risk premium, kn

-

Kre, is

6

percent. Assume that Northern is

100

percent equity financed.What is the overall composite WACC for Northern Conglomerate?

Posted Date: May 18, 2024 09:03 PM

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