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Q. 1. Estimate the divisional hurdle rates for every division. Suppose which all division use 45 % debt ratios for this purpose.

2. Now suppose which, within divisions, projects are identified as being high risk, average risk or low risk. Elucidate what hurdle rates would be assigned to projects in those risk categories within every division?

3. Describe how comfortable are you with the 1.2 also 0.9 project risk adjustment factors? Is there a theoretical foundation for the size of these adjustments?

4. Suppose the ceramic coatings division has an exceptionally large number of projects whose returns exceed the risk-adjusted hurdle rates substantially exceeds the corporate average. Elucidate what effect would this have, over time, on Ralsoolph's corporate beta also on overall cost of capital? (Suppose which the aggregate risk of the division remains unchanged.)

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M9308631

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