Benson's, Inc. has an overall cost of equity of 10.24 % and a beta of 1.2. The firm is financed 100 % with common stock. The risk-free rate of return is 4 %. What is an appropriate cost of capital for a division within the firm that has an estimated beta of 1.5?
A) 11.6 %
B) 11.8 %
C) 12.0 %
D) 12.4 %
E) 12.8 %
Correct Answer:
Verified
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