Wizard Co. currently has only a real estate division and uses only equity capital; however, it is considering creating consulting and distribution divisions. Its beta is currently 1.3. The risk-free rate is 3.1%, and the market risk premium is 6.4%.

The distribution division will have less risk than the firms real estate division, so its beta is expected to be 0.5.

This means that the distribution divisions cost of capital will be:

15.37%

16.67%

6.30%

16.57%

Wizard Co. expects 65% of its total value to end up in the real estate division, 25% in the consulting division, and 10% in the distribution division.

Based on this information, what rate of return should its investors require once it opens the new divisions? (Note: Round your intermediate calculations to two decimal places.)

11.74%

13.04%

14.59%

16.49%