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What is an appropriate cost of capital for division A

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Question - Production Unlimited has an overall beta of .92 and a cost of equity of 10.8 percent for the firm overall. The firm is 100 percent financed with common stock. Division A within the firm has an estimated beta of 1.47 and is the riskiest of all of the firm's operations. What is an appropriate cost of capital for division A if the market risk premium is 6 percent?

9.9 percent

11.6 percent

14.1 percent

15.9 percent

16.7 percent

Reference no: EM132288962

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