A firm's cost of capital is often a reflection of its activities and funding needs. Consider the case of Wizard Company, 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 1.3. The risk-free rate is 4.8%, and the market-risk premium is 5.2%. 11.56% 11.04% 9.60% 4.80% This means that the firm's real estate division will have a cost of capital of: will be The consulting division is expected to have a beta of 2.1, because riskier than the firm's real estate division. 18.22% 16.67% 17.07% This means that the firm's consulting division will have a cost of capital of: 15.72% The distribution division will have less risk than the firm's real estate division, so its beta is expected to be 0.6. 7.92% 17.77% This means that the distribution division's cost of capital will be: 16.47% 17.67% Wizard Co. expects 70% of its total value to end up in the real estate division, 20% in the consulting division, and 10% in the distribution division. 16.78% 14.88% Based on this information, what rate of return should its investors require once it opens the new divisions? 13.33% 12.03%