A company has 2 operating divisions. It wants to estimate the cost of capital for each division and for the firm. Assume all debt is risk-free.

Firm	Equity Beta	Debt Ratio = Debt/Value	Percent of Firm Value
Check Cables	.90	.40	40%
Winter Wares	1.20	.20	60%

Estimate the asset beta for each division.

The risk-free rate is 3% and market risk premium is 6%. Find the cost of capital for each division.

The firms (overall) debt to value ratio is .30. Assuming your answers above are correct, what is the firms cost of capital and equity beta?

Winter has a new project that has low risk. They estimate the project beta at .50. What rate should they use to evaluate the project? Explain.