Business, 30.10.2019 19:31 Angellopezzz
Ecri corporation is a holding company with four main subsidiaries. the percentage of its business coming from each of the subsidiaries, and their respective betas, are as follows:
subsidiary % of business beta
electric utilities 60% 0.70
cable company 25 0.90
real estate 10 1.30
int’l special pjt 5 1.50
(a)-what is the holding company’s beta?
(b)-assume that the risk-free rate is 6% and that the market risk premium is 5%. what is the holding company’s required rate of return?
(c)-ecri is considering a change in its strategic focus: it will reduce its reliance on the electric utility subsidiary so that the percentage of its business from the subsidiary will be 50%. at the same time, ecri will increase its reliance on the international / special projects division, and the percentage of its business from that subsidiary will rise to 15%. what will be the shareholders’ required rate of return if management adopts these changes?
Answers: 3
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Ecri corporation is a holding company with four main subsidiaries. the percentage of its business co...
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