The Warren Corporation Has an Overall Cost of Equity of 9.5

The Warren Corporation has an overall cost of equity of 9.5 percent and a beta of 1.3. The firm is financed 100 percent with common stock. The risk-free rate of return is 3 percent. What is an
Appropriate cost of capital for a division within the firm that has an estimated beta of .85?

A) 5.75 percent
B) 6.50 percent
C) 7.25 percent
D) 8.50 percent
E) 9.50 percent