Fin

Fin

1. Conglomerate Company has a cost of capital, based on the CAPM, of 17%. The risk-free rate is 4% and the market risk
premium is 10%. The firm has 3 divisions:

Weight	Division	Division Beta
1/3	Automotive Retailer	2.0
1/3	Computer Manufacturer	1.3
1/3	Electric Development	0.6

Find the correct cost of capital for evaluating a new generation of electrical equipment. Explain.

Fin

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