Business, 12.04.2021 21:20 erinloth123
Branson works for a firm that is expanding into a completely new line of business. He has been asked to determine an appropriate WACC for an averagerisk project in the expansion division. Branson finds two publicly traded standalone firms that produce the same products as his new division. The average of the two firm's betas is 1.40. Further, he determines that the expected return on the market portfolio is 11.00% and the riskfree rate of return is 3.00%. Branson's firm finances 70% of its projects with equity and 30% with debt, and has a beforetax cost of debt of 8% and a corporate tax rate of 20%. What is the WACC for the new line of business? A. About 10.78% B. About 13.12% C. About 11.86% D. About 12.64%
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Branson works for a firm that is expanding into a completely new line of business. He has been asked...
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