Use the following information to answer the question(s) below.

Division of Wyatt Oil	Asset Beta	Next Period's Expected Free Cash Flow ($mm)	Expected Growth Rate
Oil Exploration	1.4	450	4.0%
Oil Refining	1.1	525	2.5%
Gas & Convenience Stores	0.8	600	3.0%

The risk-free rate of interest is 3% and the market risk premium is 5%. The cost of capital for the oil exploration division is closest to:

		6.0%.
		8.5%.
		10.0%.
		7.0%.