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If a firm has two divisions and one division is riskier than the other, what would be the potential result if the firm used its overall wacc to evaluate the projects in both divisions?

Answer :

Today at 10:34 PM

If a firm uses an overall WACC for both the projects this will have impact on both the projects as the riskier project will show positive result as the WACC will be lower as compared to what should be and the less riskier project will show negative results as compared to when calculated with own WACC.

What is Interest Rate?

Interest rate is the rate of borrowing in the market, however to calculate WACC this interest rate is adjusted with other factors such as, the risk of the project or company.

The risk have a significant effect over the WACC and therefore it is highly recommended that project specific WACC is used.

Learn more about Interest Rate at https://brainly.com/question/27135457

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