Question: Swizer Industries has two separate divisions. Division X has less risk so its projects are assigned a discount rate equal to the firm's WACC minus

Swizer Industries has two separate divisions. Division X has less risk so its projects are assigned a discount rate equal to the firm's WACC minus 0.5 percent. Division Y has more risk and its projects are assigned a rate equal to the firm's WACC plus 1 percent. The company has a debt-equity ratio of 0.5 and a tax rate of 32 percent. The cost of equity is 14.8 percent and the aftertax cost of debt is 5.4 percent.

What discount rate should be assigned for Division X and for Division Y?

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