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XYZ Corp is an all equity firm with a beta of 2.0. It has two divisions ( A and B ). Division A accounts for
XYZ Corp is an all equity firm with a beta of 2.0. It has two divisions ( A and B ). Division A accounts for 40 percent of firm value and Division B accounts for 60%. 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? B. What is the beta of Division B
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