EotW [5] Eyes of the World Corporation has traditionally employed a firm-wide discount rate for capital budgeting

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EotW [5]

Eyes of the World Corporation has traditionally employed a firm-wide discount rate for capital budgeting purposes. However, its two divisions, publishing and entertainment, have different degrees of risk given by ftp = 1 and /3g = 1.5, where /3p is the beta for publishing and /?g the beta for entertainment. The beta for the overall firm is 1.3. The risk free rate is 5% and the expected return on the market is 15%. The firm is considering the following capital expenditures:

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