Business, 11.12.2019 04:31 Sushmitarai4934

Old town industries has three divisions. division x has been in existence the longest and has the most stable sales. division y has been in existence for five years and is slightly less risky than the overall firm. division z is the research and development side of the business. given this, the firm should probably:
a) require the highest rate of return from division x since it hos been in existence the longest
b) assign the highest cost of capital to division z because it is most likely the riskiest of the three divisions
c) use the firm's wacc as the cost of capital for division z as it provides analysis for the entire firm.
d) use the fim's wacc as the cost of capital for divisions.
e) allocate captal funds evenly amongst the divisions to maintain the current capital structure of the firm.

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