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Attempts Do No Harm: 4 10. Adjusting the cost of capital for risk Aa Aa Divisional Costs of Capital Newtown Propane currently has only a
Attempts Do No Harm: 4 10. Adjusting the cost of capital for risk Aa Aa 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 1.2. The marketing division is expected to have a beta of 1.9, because it will have more risk than the firm's wholesale division. The retail division is expected to have a beta of 0.7, because it will have less risk than the firm's wholesale division. The risk-free rate is 3.6%, and the market-risk premium is 6.7%. Based on this information, fill in the missing information in the following below: Cost of Capital Wholesale division Marketing division Retail division If 55% of Newtown Propane's total value ends up in the wholesale division, 20% in the marketing division, and 25% in the retail division, then its investors should require a return of
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