What is the pistol and rifle division WACC

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Reference no: EM131916191

Colt Manufacturing has two divisions: 1) pistols; and 2) rifles. Betas for the two divisions have been determined to be beta (pistol) equals=0.6 and beta (rifle) equals=0.70. The current risk-free rate of return is 5%, and the expected market rate of return is 12%. The after-tax cost of debt for Colt is 7.5%. The pistol division's financial proportions are 40.0% debt and 60.0% ?equity, and the rifle division's are 50.0% debt and 50.0% equity.

a. What is the pistol division's WACC?

b. What is the rifle division's WACC?

Reference no: EM131916191

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