XYZ Corp is an all equity firm with a beta of 1.0. It has two divisions (A and B). Division A accounts for 20 percent of firm value and Division B accounts for 80%. The company has determined that the cost of capital for Division A is 10 percent. Assuming the expected return on the market is 8 percent and the risk-free rate is 2 percent.

a. What is the cost of capital for Division B?

(Click to select) 6.0% 7.5% 8% 8.33% 15

B. What is the beta of Division B?

(Click to select) 0.66 0.922.17 1.93 0.87