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Wizard Co. currently has only a real estate division and uses only equity capital; however, it is considering creating consulting and distribution divisions. Its beta
Wizard Co. currently has only a real estate division and uses only equity capital; however, it is considering creating consulting and distribution divisions. Its beta is currently 1.3. The risk-free rate is 3.6%, and the market-risk premium is 5.2%. O 10.36% O 7.20% 0 3.60% 08.28% This means that the firm's real estate division will have a cost of capital of: The consulting division is expected to have a beta of 2.1, because it will be riskier than the firm's real estate division. O 15.87% O 17.02% 14.52% O 15.47% This means that the firm's consulting division will have a cost of capital of: The distribution division will have less risk than the firm's real estate division, so its beta is expected to be 0.4. O 15.27% O 16.57% 05.68% 0 16.47% This means that the distribution division's cost of capital will be: Wizard Co. expects 65% of its total value to end up in the real estate division, 25% in the consulting division, and 10% in the distribution division. O 12.23% O 10.93% O 15.68% O 13.78% Based on this information, what rate of return should its investors require once it opens the new divisions
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