Problem $14-22$ Divisional Cost of Capital $($LO$5)$

Wrentham Inc. has two divisions of equal size. Division A has a beta of $0\mathrm{.}93,$ while Division B has a beta of $1\mathrm{.}57.$

Wrentham has no debt, and is completely equity financed. The real risk$-$free rate is $6\mathrm{.}5\%,$ and the market risk

premium is $5\mathrm{.}3\%.$ The cost of capital for Wrentham is $16\%.$ The projects in division A are discounted at A$\text{'}$s required

return, and division B$\text{'}$s projects are discounted at B$\text{'}$s required return.

Calculate cost of equity for the two divisions. $($Do not round intermediate calculations. Enter your answer as a

percentage rounded to $3$ decimal places.$)$

Which of the two divisions has a lower cost of capital than the overall cost of capital for the firm?

Division A

Division B

Both A & B

None