Wendy Cheung was at it again! It seemed like she was causing troubles wherever she went.

Required:

1. Determine the hurdle rate for the entire company.
2. What is meant by the “pure play” approach to estimating the required return on an investment?
3. Using the data gathered by Wendy for the “pure play” approach, calculate the divisional hurdle rates.
4. Using the firm’s overall weighted cost of capital evaluate the three divisions’ project proposals. What are your findings?
5. How are the decisions affected when the divisional hurdle rates are used instead? 6. Determine the amounts of annual net cash inflow for each division that result in a zero NPV based on the divisional hurdle rate. How are you going to explain to the division managers your findings?