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. 45 and a tax rate of 35 percent. The cost of equity is 14.7 percent and the after-tax cost of debt is 5.1 percent. Presently, each division is considering a new project. Division Y's project provides a 12.3 percent rate of return and division X's project provides an 11.64 percent return. Which projects, if any, should the company accept? A. Accept both X and YB. Accept X and reject YC. Reject X and accept YD. Reject both X and YE. The answer cannot be determined based on the information provided
+3
Answers (1)
Know the Answer?
Not Sure About the Answer?
Find an answer to your 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 ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Home » Business » 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.