What is the discount rate applicable to division

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International Exchange has three divisions: A, B, and C. Division A has the least risk and Division C has the most risk. The firm has an aftertax cost of debt of 6.1percent and a cost of equity of 14.3 percent. The firm is financed with 37 percent debt and 63 percent equity. Division A's projects are assigned a discount rate that is 2.2 percent less than the firm's weighted average cost of capital. What is the discount rate applicable to Division A?

9.07 percent

7.98 percent

6.87 percent

8.27 percent

9.48 percent

Reference no: EM131188212

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