Miller Stores Has an Overall Beta of 1

Multiple Choice

Miller Stores has an overall beta of 1.38 and a cost of equity of 12.7 percent for the company overall. The firm is all-equity financed. Division A within the firm has an estimated beta of 1.52 and is the riskiest of all of the company's operations. What is an appropriate cost of capital for Division A if the market risk premium is 7.4 percent?

A) 13.12 percent
B) 13.74 percent
C) 12.63 percent
D) 12.77 percent
E) 13.01 percent