Your company has many divisions, such as Al, online gaming, software, and manufacturing computers. The...
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Your company has many divisions, such as Al, online gaming, software, and manufacturing computers. The WACC of your firm is estimated to be 12%. You are evaluating a project in the Al division, and you feel that Vocal Inc. is a comparable publicly traded company for your Al division. Vocal Inc. has a beta of 1.5 and its debt is 20% of its capital structure. The pretax cost of debt is 7%. Its tax rate is 35%. What is the appropriate discount rate to evaluate this project in the Al division? Assume a risk free rate of 1% and a market risk premium of 7%. O A. 12.6% O B. 12% O C. 10.1% OD. 11.5%
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