Firm uses corporate-wide WACC in multi-divisional firm

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Reference no: EM131357403

Suppose a firm uses a corporate-wide WACC in a multi-divisional firm. Which of the following statement(s) is (are) correct:

1. The use of a corporate-wide cost of capital would allocate too much capital to the riskier divisions.

2. Multi-divisional companies should use a common corporate-wide hurdle rate.

3. The use of a corporate-wide cost of capital would allocate too much capital to the less risky divisions.

4. The use of a corporate-wide cost of capital could lead to the rejection of some projects in the less risky divisions.

Reference no: EM131357403

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