Ask Question
BusinessBusiness
22 July, 19:23

Miller Inc. has an overall beta of 0.79 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?

+3
Answers (1)
  1. 22 July, 19:34
    0
    Ra=21.5%

    Explanation:

    Ra=Rf + (Rm-Rf) * Ba

    Where Ra=?

    Rf=11.2%

    Rm-Rf=9.5%

    Ba=1.08

    Ra=11.2% + (9.5%) * 1.08

    Ra=11.2%+10.3%

    Ra=21.5%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Miller Inc. has an overall beta of 0.79 and a cost of equity of 11.2 percent for the firm overall. The firm is 100 percent financed with ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
Mikes Inc. has provided the following information: Cost per Unit Cost per Period Direct materials $ 6.85 Direct labor $ 3.60 Variable manufacturing overhead $ 1.25 Fixed manufacturing overhead $ 10,400 Sales commissions $ 1.
Answers (1)
Gloria has finished reading 30% of a 340 page novel. how many pages has she read?
Answers (1)
If a special sales order is accepted for 8,100 widgets at a price of $39 per unit, and fixed costs increase by $13,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)
Answers (1)
A company using the step-down method of allocating service department costs has two service departments and two production departments.
Answers (1)
Higher national trade to GDP ratios are one potential indicator of globalization. A. True B. False
Answers (1)
New Questions in Business
The following information was available to the accountant of Scarlet Co. when preparing the monthly bank reconciliation: Cash balance per bank statement $ 1,115 Cash balance per books (prior to reconciliation) 842 Outstanding check #643 642
Answers (1)
Your business plan is a
Answers (1)
Coupons and sales are frequently used marketing tactics for which form of competition?
Answers (1)
Which term best describes an opening at least 30 inches high and 18 inches wide in any wall or partition through which persons may fall? A. Floor opening B. Portable ladder C. Wall opening D. Fixed industrial stairs
Answers (1)
What should a supervisor do when employee behavior does not automatically produce feedback? train the employee to monitor his/her own behavior and provide self feedback modify the task so that feedback is automatic provide systematic observation
Answers (1)
Home » Business » Miller Inc. has an overall beta of 0.79 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.
Sign Up Forgot Password?