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Sir sorry i m asking it again in this question cannt we use ke 15.09 for discounting how do we know we have to find further wacc.or in any question how do we know this that wr have to calculate further wacc.Iknow u replied me long back but i forgot to copy n now cannt find in email.Please help me sir its really important. Thanks
Romage current business = property + manufacturing
Romage wants to split: property only Manufacturing only
the business risk of property + Manufacturing will not be the same as business risk of property only or manufacturing only. the Beta assets will be different, capital structure also likely to change (so financial risk will change). so have to recalculate Ke (ungearing and regearing) and a risk adjusted WACC.
I think that this is the link to my previous:
https://opentuition.com/topic/romage-june-2000/if the gearing of the Manufacturing and property sales is similar to industry average than there is no need to degear or regear betas of the sectors, use the industry average betas . and calculate cost of equity.
if gearing is not similar to industry average than degear and regear betas and use the beta to calculate cost of equity than WACC.
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