Mid-States is a multi-divisional utility company. Mid-States has four divisions with the following betas and proportions of the firm's total assets: Division Beta % of Assets Electric & Gas 0.75 45 Bus transportation 1.21 20 Real estate 2.80 25 Recreation 1.85 10 The risk-free rate is 2 percent and the return on the stock market as a whole is 15%. If Mid-States is considering a residential development, what should the firm use as its cost of equity in evaluating this project

Mid-States is a multi-divisional utility company. Mid-States has four divisions with the following betas and proportions of the firm's total assets: Division Beta % of Assets Electric & Gas 0.75 45 Bus transportation 1.21 20 Real estate 2.80 25 Recreation 1.85 10 The risk-free rate is 2 percent and the return on the stock market as a whole is 15%. If Mid-States is considering a residential development, what should the firm use as its cost of equity in evaluating this project

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 2P

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