Use the Following Information to Answer the Question(s)below

question 97

Multiple Choice

Use the following information to answer the question(s) below. The risk-free rate of interest is 3% and the market risk premium is 5%.
-The cost of capital for the oil exploration division is closest to:

• A)6.0%.
• B)7.0%.
• C)8.5%.
• D)10.0%.

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Definitions:

Milligram

A unit of mass equal to one thousandth of a gram, used in the metric system.

Microgram

A unit of mass in the metric system, equal to one-millionth of a gram.

Milliliters

A unit of volume in the metric system, equal to one thousandth of a liter or about 0.0338 fluid ounces.

Liter

A metric unit of volume equal to 1,000 milliliters or about 0.264 gallons.