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Wyatt has two main competitors in the leisure apparel business, Company A and
Question
% of revenue from leisure apparel100%
100%
Wyatt's CFO is interested in calculating a WACC for projects in its business apparel division. 50% of Wyatt's revenue, profit, and assets come from the business apparel division, while the other 50% comes from the leisure apparel division. The company assumes that projects in both divisions are financed with 45% debt and 55% equity. The company also assumes that the business risk of its leisure projects is similar to that of its competitors in the leisure apparel business. What would you estimate to be the WACC for a typical business apparel project for Wyatt?
WACCWACC = E / A * Re + D/ A * R * (1 - T.)A, Assets (in aggregate dollars):$100E, Equity (in aggregate dollars):$55D, Debt (in aggregate dollars):$45The Weighted Average Cost of Capital...