Mid-States is a multi-divisional utility company. Mid-States has four divisions with the following betas and proportions of the firm's total assets:

Division Beta % of Assets

Electric & Gas 0.75 45

Bus transportation 1.21 20

Real estate 2.80 25

Recreation 1.85 10

The risk-free rate is 2 percent and the return on the stock market as a whole is 15%. If Mid-States is considering a residential development, what should the firm use as its cost of equity in evaluating this project?

Question 1 options:

	42.00%
	44.00%
	38.40%
	26.40%