Verano Inc

Multiple Choice

Verano Inc.has two business divisions-a software product line and a waste water clean-up product line.The software business has a cost of equity capital of 11% and the waste water clean-up business has a cost of equity capital of 6%.Verano has 50% of its revenue from software and the rest from the waste water business.Verano is considering a purchase of another company in the waste water business using equity financing.What is the appropriate cost of capital to evaluate the business?

A) 11%
B) 8.5%
C) 6%
D) 9.3%
E) 7.6%