Quantitative Questions: Please provide how you reach the answer. Partial marks may be given based on your approach. If you answer a question without a quantitative analysis, you must justify your answer logically.

1. Samson Co. has two divisions: Semi-conduct and Oil which account for 40% and 60% of the total asset value, respectively. The current leverage ratio (Debt/Asset) of Samson Co. is 0.3. The firms debt has a beta of 0.1. By researching all companies in the same industry, you identified the following comparable firms for each Division.

Division	Comparable Firms	Equity beta	Debt beta	Debt/Asset
Semi-Conduct	LG	1.2	0.3	0.7
	Hynix	0.7	0	0.5
Oil	Shell	0.5	0	0.3
	Exxon	1.0	0.2	0.6

The risk free rate is 5% and the expected return of the market portfolio is 10%.

a. Find the cost of capital (i.e., WACC) of each comparable firm.

b. If you assign equal weights to comparable firms in each division, what is the cost of capital of each division?

c. Find the cost of equity of Samson Co.

d. If Samson Co. launches a new project in Food industry, which has completely different risks from Semi-conduct and Oil divisions, what is the required rate of return of the new project? If you can find the rate from the information provided above, please specify it. If you cant find it, please state the reason.