Problem:
Please explain how to calculate the weighted average cost of capital and how it compares to divisional cost of capital approach.
Currently, Red Sun, Inc.'s capital structure is 65% equity based and 35% debt based. Red Sun is in the 20% marginal tax bracket in Japan and has a cost of equity of 12% and an average debt cost of 6%. Calculate Red Sun's Weighted Average Cost of Capital (WACC).
What is the main advantage of the Divisional Cost of Capital Approach over the WACC?
Use the available resources to research the NYSE and the Divisional Cost of Capital Approach to complete this assignment.