Greyson Associates has three divisions:

Division Beta Firms Assets

Aerospace/Defense 2.20 35%

Shipbuilding 1.60 40%

Surgical Devices ? 25%

You have the following information:

The (leveraged) beta for Greyson = 1.70

Debt ratio for the surgical devices division = 0.30

Risk-free rate of interest = 1.10%

Market risk premium = 9.40%

Tax rate = 25%

Assuming that the divisions debt ratio does not change, what is the minimum rate of return that Greyson should require on the equity-financed portion of investments in the surgical devices division? Select the closest answer.

14%

13%

11%

12%

15%