Verano Inc

question 94

Multiple Choice

Verano Inc.has two business divisions - a software product line and a waste water clean-up product line.The software business has a cost of equity capital of 11% and the waste water clean-up business has a cost of equity capital of 6%.Verano has 50% of its revenue from software and the rest from the waste water business.Verano is considering a purchase of another company in the waste water business using equity financing.What is the appropriate cost of capital to evaluate the business?

• A)11%
• B)8.5%
• C)6%
• D)9.3%

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Definitions:

Welfare Losses

Economic inefficiencies that occur when there is a divergence from optimal supply and demand conditions, leading to a net loss in social welfare.

MSC

Marginal Social Cost; the total cost to society of producing an additional unit of a good, including both private costs and any external costs.

MEC Curve

A graphical representation showing the marginal external costs associated with the production of additional units of a good.

Malpractice Lawsuits

Legal claims made against professionals who fail to perform their duties with the competence expected, leading to harm.