Intermountain Resources is a multidivisional company. It has three divisions with the following betas and proportion of the firm's total assets:
The risk-free rate is 7 percent and the market risk premium is 8 percent.
a. What is the firm's weighted average beta?
b. What required equity rate of return should the firm use for average-risk projects in its natural gas pipeline division?
c. What required equity rate of return should the firm use for average-risk projects in its oil and gas exploration division?