Divisional WACC approach – 

Suppose your company has decided to use a divisional WACCapproach to analyze projects. The firm currently has 2 divisions, A and B, withbetas for each division of 0.5 and 1.5, respectively. If all current and futureprojects will be financed with half debt and half equity, and if the currentcost of equity (based on an average firm beta of 1.0 and a current risk-freerate of 5%) is 16% and the after-tax yield on the company’s bonds is 6%, whatare the WACCs for divisions A and B? Hint: First Solve for Market Risk Premium(MRP). MRP = (Km-Rf),a. Division A WACC?,b. Division B WACC?