The distribution division will have less risk than the firm\'s real estate divis

Question

The distribution division will have less risk than the firm's real estate division, so its beta is expected to be 0.4 O 6.72% O 16.7996 o 15.59% O 16.89% This means that the distribution division's cost of capital will be: Wizard Co. expects 60% of its total value to end up in the real estate division, 25% in the consulting division, and 15% in the distribution division. 0 16.63% O 11.85% O 14.73% O 13.18% Based on this information, what rate of return should its investors require once it opens the new divisions? | |

Explanation / Answer

Cost of capital of distribution division = risk free rate + 0.4*(market rate - risk free rate) = risk free rate + 0.4*market risk premium

rate of return = 0.6*cost of real estate division + 0.25*consulting division + 0.15*distribution division

please provide more details on market return, risk free rate and other divisions

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