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Why?

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Under what circumstances would it be appropriate for a firm to use different costs of capital for its different operating divisions?
If the overall firm Weighted Average Cost of Capital (WACC) was used as the hurdle rate for all divisions, would the riskier divisions or more conservative divisions tend to get most of the investment projects? Why?
If you were to try to estimate the appropriate cost of capital for different divisions, what types of problems might you encounter?
Identify and explain two techniques that you could use to develop a rough estimate for each division’s cost of capital.

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