Utmost Ltd. has an overall beta of 0.64 and a cost of equity of 11.2% for the firm overall. The firm is 100% financed with common stock. Division A within the firm has an estimated beta of 1.08 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 9.5%
Utmost Ltd. has an overall beta of 0.64 and a cost of equity of 11.2% for the firm overall. The firm is 100% financed with common stock. Division A within the firm has an estimated beta of 1.08 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 9.5%
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 6P
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Utmost Ltd. has an overall beta of 0.64 and a
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