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Adjusting the cost of capital for risk Divisional Costs of Capital Newtown Propane currently has only a wholesale division and uses only equity capital; however,
Adjusting the cost of capital for risk Divisional Costs of Capital Newtown Propane currently has only a wholesale division and uses only equity capital; however, it is considering creating marketing and retail divisions. Its beta is currently 1.5. The marketing division is expected to have a beta of 2.0, because it will have more risk than the firm's wholesale division. The retail division is expected to have a beta of 0.6, because it will have less risk than the firm's wholesale division. The risk-free rate is 4.8%, and the market-risk premium is 6.7%. Based on this information, fill in the missing information in the following below: If 70% of Newtown Propane's total value ends up in the wholesale division, 20% in the marketing division, and 10% in the retail division, then its investors should require a return of_____________
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