The Oil Derrick Has an Overall Cost of Equity of 13.6

Multiple Choice

The Oil Derrick has an overall cost of equity of 13.6 percent and a beta of 1.28.The firm is financed solely with common stock.The risk-free rate of return is 3.4 percent.What is an appropriate cost of capital for a division within the firm that has an estimated beta of 1.18?

A) 12.37 percent
B) 12.41 percent
C) 12.54 percent
D) 12.67 percent
E) 12.80 percent