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Wholesale division = 12.10%, 2.80%, 5.60%, 7.00% Marketing division = 16.55%, 17.70%, 15.20%, 16.15% Retail division = 6.52%, 17.15%, 17.25%, 15.95% Divisional Costs of Capital
Wholesale division = 12.10%, 2.80%, 5.60%, 7.00%
Marketing division = 16.55%, 17.70%, 15.20%, 16.15%
Retail division = 6.52%, 17.15%, 17.25%, 15.95%
Divisional Costs of Capital Newtown Propane currently has only a wholesale division and uses only equity capital; however, it is considering creating marketing and retail divisions. Its beta is currently 1.5. The marketing division is expected to have a beta of 2.0, because it will have more risk than the firm's wholesale division. The retail division is expected to have a beta of 0.6, because it will have less risk than the firm's wholesale division. The risk-free rate is 2.8%, and the market-risk premium is 6.2%. Based on this information, fill in the missing information in the following below: Cost of Capital Wholesale division Marketing division Retail division If 75% of Newtown Propane's total value ends up in the wholesale division, 1 0% in the marketing division, and 15% in the retail division, then its investors should require a return of 14.45% 12.90% 1.60% 16.35%Step by Step Solution
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