BUS 401 WEEK 4 DQ 2 COST OF CAPITAL
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BUS 401 WEEK 4 DQ 2 COST OF CAPITAL
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Cost of Capital
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Corporations often use different costs of
capital for different operating divisions. Using an example, calculate the
weighted cost of capital (WACC). What are some potential issues in using
varying techniques for cost of capital for different divisions? If the overall
company weighted average cost of capital (WACC) were used as the hurdle rate
for all divisions, would more conservative or riskier divisions get a greater
share of capital? Explain your reasoning. What are two techniques that you
could use to develop a rough estimate for each division’s cost of capital? Your
initial response should be 200 to 250 words.
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