Question

Verano Inc. has two business divisions-a software product line and a waste water clean-up product line. The software business has a cost of equity capital of 10% and the waste water clean-up business has a cost o equity capital o 7%. Verano has 50% o s revenue rom software and the rest rom the waste water business. Verano s considerin a urchase o ano er an the as wat business usin equ financing. What is the appropriate cost of capital to evaluate the business? OA, OB. ° C. 8.5% 9% 7% 10% 6.5% D. OE.

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Answer #1

B. 7%

Cost of capital = Cost of capital for the related division

Cost of capital = 7%

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