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Determine the cost of capital for this new division

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Davis is interested in establishing a new division that will focus primarily on developing new Internet-based project. Determine the cost of capital for this new division, you discover that specialized firms involved in similar projects have, on average, the following characteristics:

(1) their capital structure is 10% debt and 90% common equity;

(2) their cost of debt is typically 12% and

(3) they have a beta of 1.7. Given this information, what would your estimate be for new division's cost of

Reference no: EM132531318

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