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4. Explain what a rm's standard deviation of returns and equity beta are. Describe the two forms of risk (systematic and nonsystematic) and explain how stande deviation and beta are related to them. Explain why we only care about systematic risk. [6] 5. W inc. has an overall expected equity cost of capital of 12%, market value of equity of $3 billion, and market value of debt of $2 billion with a cost of debt equal to 3%. It is composed of two divisions: One division sells software and the other division sells oomputers. Each division represents 50% of the total rm. You have decided that Hewlett Packard (HP) is very similar to your computer division, in terms of both risk and nancing. You go online and nd the following information: HP's equity beta is 0.8, its market value of equity is $90 billion, and it has $10 billion in debt. [a] Calculate the appropriate disoount rate for decisions in its computer division? [8] (b) Calculate the appropriate discount rate for decisions in its software division? [8] ASSUME: Risk-free rate=3%; Equity market risk premium=7%; Tax rate=21%