Problem 12-18 eBook Question 3 of 25 Check My Work (10 remaining) Intermountain Resources is a...

Transcribed Image Text:

Problem 12-18 eBook Question 3 of 25 Check My Work (10 remaining) Intermountain Resources is a multidivisional company. It has three divisions with the following betas and proportion of the firm's total assets: Division Beta Proportion of Assets Natural gas pipelines 0.80 Oil and gas production 1.10 Oil and gas exploration 1.50 50% 30 20 The risk-free rate is 10 percent, and the market risk premium is 8 percent. a. What is the firm's weighted average beta? Round your answer to two decimal places. b. What required equity rate of return should the firm use for average-risk projects in its natural gas pipeline division? Round your answer to one decimal place. % c. What required equity rate of return should the firm use for average-risk projects in its oil and gas exploration division? Round your answer to one decimal place. % Icon Key Check My Work (10 remaining) Problem 12-18 eBook Question 3 of 25 Check My Work (10 remaining) Intermountain Resources is a multidivisional company. It has three divisions with the following betas and proportion of the firm's total assets: Division Beta Proportion of Assets Natural gas pipelines 0.80 Oil and gas production 1.10 Oil and gas exploration 1.50 50% 30 20 The risk-free rate is 10 percent, and the market risk premium is 8 percent. a. What is the firm's weighted average beta? Round your answer to two decimal places. b. What required equity rate of return should the firm use for average-risk projects in its natural gas pipeline division? Round your answer to one decimal place. % c. What required equity rate of return should the firm use for average-risk projects in its oil and gas exploration division? Round your answer to one decimal place. % Icon Key Check My Work (10 remaining)