Calculate the cost of capital for division

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Calculate the cost of capital (WACC) for your division based on the following information. You found three independent firms solely engaging in the same business of your division. Firm A has a beta of 1.8 and D/E of 1.2, firm B has a beta of 1.5 and D/E of 1, and firm C has a beta of 1.2 and D/E of 0.8.

Your division's D/E is 1.5. The tax rate is 40%. The before tax cost of debt is 8%. The risk free rate is 4% and the market return is 12%.

What is your division's WACC?

Reference no: EM132694445

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