3. Amalgamated Products has two operating divisions, foods and electronics. The firm has $20 M of...

 

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3. Amalgamated Products has two operating divisions, foods and electronics. The firm has $20 M of risk-free debt outstanding. • The market value of its equity is $30 M. The risk-free rate is 4% and the market risk premium is 8%. • There are no corporate taxes. The equity beta is 2.9. The electronics division is financed for half by debt of its total value. The food division is financed 100% by equity. ● ● ● a. Calculate the expected return on equity for Amalgamated. b. Evaluate the cost of capital for each one of Amalgamated divisions (Electronics and Food). c. Evaluate the cost of capital for Amalgamated. 3. Amalgamated Products has two operating divisions, foods and electronics. The firm has $20 M of risk-free debt outstanding. • The market value of its equity is $30 M. The risk-free rate is 4% and the market risk premium is 8%. • There are no corporate taxes. The equity beta is 2.9. The electronics division is financed for half by debt of its total value. The food division is financed 100% by equity. ● ● ● a. Calculate the expected return on equity for Amalgamated. b. Evaluate the cost of capital for each one of Amalgamated divisions (Electronics and Food). c. Evaluate the cost of capital for Amalgamated.