Divisional Cost of Capital


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Georgio's company has three divisions. He wants to invest in new equipment to help one of his divisions be more productive. When looking at what return he'll need on his investment to make it worthwhile, Georgio estimates what his company as a whole will need to bring in. Is he using divisional cost of capital? Why or why not?

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1. An estimate of the minimum a project will have to return in order for it to be a good investment is called the:

2. Louisa is the CEO of a company that operates in several different countries. If the risk of doing business in a specific country is very high, then the divisional cost of capital will be:

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About This Quiz & Worksheet

Assess what you understand about the divisional cost of capital with these resources. Interactive quiz questions address things like real-world business examples and a project's return that would potentially make it a good investment.

Quiz & Worksheet Goals

Use these resources to:

  • Analyze the divisional cost of capital that might differ in various countries
  • Recognize how to properly calculate divisional cost of capital
  • Determine when to use either the divisional cost of capital or the cost of capital

Skills Practiced

  • Distinguishing differences - compare and contrast topics from the lesson, such as divisional cost of capital and the cost of capital
  • Information recall - access the knowledge you've gained regarding a project's minimum return which makes it a good investment
  • Knowledge application - use your knowledge to answer questions about real-world scenarios where these theories are applied

Additional Learning

Learn more about this area of study via the lesson entitled Divisional Cost of Capital. The topics covered in the lesson include the following:

  • What the cost of capital is
  • How to define divisional cost
  • How to use these theories in given real-world examples