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 0.9 and Division B has a beta of 1.6.The two divisions are the same size.The risk-free rate is 5% and the market risk premium is 5.80%.Assume that Northern is 100% equity financed.What is the overall composite WACC for Northern Conglomerate?
A) 12.86%
B) 14.09%
C) 12.25%
D) 11.64%
E) 10.41%

Question

​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 0.9 and Division B has a beta of 1.6.The two divisions are the same size.The risk-free rate is 5% and the market risk premium is 5.80%.Assume that Northern is 100% equity financed.What is the overall composite WACC for Northern Conglomerate?
A) 12.86%
B) 14.09%
C) 12.25%
D) 11.64%
E) 10.41%

Quizplus · Accepted Answer

The Answer is C

​Northern Conglomerate Has Two Divisions,Division a and Division B

Northern Conglomerate Has Two Divisions,Division a and Division B