SCAN Is a Multi-Divisional Utility Company

question 55

Multiple Choice

SCAN is a multi-divisional utility company.SCAN has four divisions with the following betas and proportions of the firm's total assets:

The risk-free rate is 8 percent and the market risk premium is 5 percent.If SCAN is considering a residential development, what should the firm use as its cost of equity in evaluating this project?

• A)13.05%
• B)16.20%
• C)12.25%
• D)15.00%

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