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The Oil Derrick has an overall cost of equity of 13.6 percent and a beta of 1.28. The firm is financed solely with common stock.

The Oil Derrick has an overall cost of equity of 13.6

percent and a beta of 1.28. The firm is financed solely

with common stock. The risk-free rate of return is 3.4

percent. What is an appropriate cost of equity for a

division within the firm that has an estimated beta of

1.30?

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