Miller Sisters Has an Overall Beta of 0

question 9

Multiple Choice

Miller Sisters has an overall beta of 0.64 and a cost of equity of 11.2 percent for the firm overall. The firm is 100 percent financed with common stock. Division A within the firm has an estimated beta of 1.08 and is the riskiest of all of the firm's operations. What is an appropriate cost of capital for division A if the market risk premium is 9.5 percent?

• A)15.12 percent
• B)15.38 percent
• C)15.63 percent
• D)15.77 percent
• E)16.01 percent

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Definitions:

Social Comparison Processes

The act of evaluating oneself by comparing with others, which can influence self-esteem, motivation, and behavior.

Need for Affiliation

A psychological drive that compels individuals to seek out social interactions and relationships for a sense of belonging.

Stimulus

Any event or object in the environment that evokes a response or reaction in a person or organism.

Dissimilar Attitudes

describes attitudes or opinions that significantly differ between individuals or groups, often leading to disagreement or conflict.