SCAN Is a Multi-Divisional Utility Company

question 54

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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Definitions:

Prolactin

A hormone produced by the pituitary gland that stimulates milk production after childbirth and affects sex hormone levels.

Latin Americans

People from countries in Latin America, a region of the Americas where Romance languages (primarily Spanish and Portuguese, and variably French) are spoken.

African Americans

African Americans are a racial or ethnic group in the United States with ancestry from the black racial groups of Africa.

American Indians

Indigenous peoples of the United States, including numerous tribes, each with their own distinct cultures and history.