Explain why the divisional cost of capital approach may cause problems if new projects are assigned to the wrong division

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Explain why the divisional cost of capital approach may cause problems if new projects are assigned to the wrong division

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If projects are assigned to the wrong division, the risk of that division may be significantly different than the risk of the project, implying that the project will be evaluated with a divisional cost of capital that is much different from what a project-specific cost of capital would be

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