Answer the following. a. 4. Colt Manufacturing has two divisions: 1) pistols;...
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Answer the following.
a.
4.
Colt Manufacturing has two divisions: 1) pistols; and 2) rifles. Betas for the two divisions have been determined to be beta (pistol 0.7 and beta (rifle) 1.1. The current risk-free rate of return is 2%, and the expected market rate of return is 7.5%. The after-tax cost of debt for Colt is 8%. The pistol division's financial proportions are 37.5% debt and 62.5% equity, and the rifle division's are 47.5% debt and 52.5% equity. a. What is the pistol division's WACC? b. What is the rifle division's WACC? a. What is the pistol division's WACC? (Round to two decimal places.) b. What is the rifle division's WACC? (Round to two decimal places.)
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