The Oil Derrick has an overall cost of equity of 12.7 percent and a beta of 1.13. The firm is financed solely with common stock. The risk-free rate of return is 4.8 percent. What is an appropriate cost of capital for a division within the firm that has an estimated beta of 1.16?
A) 12.37 percent
B) 12.41 percent
C) 12.54 percent
D) 12.67 percent
E) 12.91 percent
Correct Answer:
Verified
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