Intermountain resources is a multidivisional company it has, Ask an Expert

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Intermountain Resources is a multidivisional company. It has three divisions with the following betas and proportion of the firms total assets:

Division Beta Proportion of Assets

Natural gas pipelines 0.70 50%

Oil and gas production 1.20 30

Oil and gas exploration 1.50 20

The risk free rate is 7% and the market risk premium is 8%.

a. What is the firms weighted average beta?

b. What required equity rate of return should the firm use for average-risk projects in its natural gas pipeline division?

c. What required equity rate of return should the firm use for average risk projects in its oil and gas exploration division?

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Category:- Basic Finance
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