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 averageminusrisk project in the expansion division. Branson finds two publicly traded standminusalone 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 riskminusfree rate of return is 3.00%. Branson's firm finances 70% of its projects with equity and 30% with debt, and has a beforeminustax cost of debt of 8% and a corporate tax rate of 20%. What is the WACC for the new line of business?
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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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