10. Adjusting the cost of capital for risk Aa Aa Divisional Costs of Capital A firm's cost of capital is often a reflection of its activities and funding needs. Consider the case of Wizard and answer the following questions: Wizard Co. currently has only a real estate division and uses only equity capital; however, it is considering creating consulting and distribution divisions. Its beta is currently 1.5. The risk-free rate is 2.8%, and the market-risk premium is 5.8%. 11.50% 7.00% O 5.60% 2.80% This means that the firm's real estate division will have a cost of capital of: The consulting division is expected to have a beta of 2.2, because it will be riskier than the firm's real estate division. 15.56% O 16.91% This means that the frm's consulting divisin wil ave a cost of capital of:O 18.oos This means that the firm's consulting divisin will have a cost of capital of: 16.51% The distribution division will have less risk than the firm's real estate division, so its beta is expected to be 0.4 16.31% O 17.51% O 5.12% 17.61% This means that the distribution division's cost of capital will be