Question
How would i go about finding the hurdle rate of both the Food Processing and Instruments divisions if im unsure of the risk premium of each division?

-110.3 ) 4.170 1 Chestnut Foods WACC Calculation 3 Food Processing: 4 Rd 5 Re 2.58% 6.64% Instruments: 2.90% <--(1-B11)*4.6%
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Answer #1
Food Processing Instruments
Rf 2.80% 2.80%
Market Risk Premium 6% 6%
Tax Rate 37% 37%
Average Beta 0.64 1.14
We 0.8 0.8
Wd 0.2 0.2
Food Processing Instruments
Cost of equity = Rf + beta x mrp 6.64% 9.64%
Cost of Debt after Tax 2.58% 2.90%
WACC (Hurdle Rate) = D/D+E * Cost of after tax debt + E/D+E * Cost of Equity
WACC = Hurdle Rate 5.83% 8.29%
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