Assignment 10 - The Cost of Capital 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 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 1.5. The risk-free rate is 4.2%, and the market-risk premium is 6.4%. 8.40% 13.80% 04.20% O 10.50% 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 2.0, because it will be riskier than the firm's real estate division. 18.35% 17.00% O 17.95% 19.50% This means that the firm's consulting division will have a cost of capital of: The distribution division will have loss risk than the firm's real estate division, so its beta is expected to be 0.7. 8.68% 17.7596 18.95% 19.05% This means that the distribution division's cost of capital will be