An estimated WACC computed using some sort of proxy for the average equity risk of the projects in a particular business unit is known as the:
A) Business unit WACC
B) Pure play beta
C) Divisional WACC
D) Component cost

Question

Quizplus · Accepted Answer

The estimated WACC computed using some sort of proxy for the average equity risk of the projects in a particular business unit is known as the divisional WACC. This is because it is specific to the division or unit and not the entire company. Therefore, option C is the best choice. Option A (Business unit WACC) is incorrect because it is not a commonly used term in finance. Option B (Pure play beta) is incorrect because it is used to estimate the equity beta of a company that operates in a single industry and option D (Component cost) is too general and does not specifically refer to estimation of WACC for a particular unit or division.

An Estimated WACC Computed Using Some Sort of Proxy for the Average