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1. (10 pt) The Conglomerate Corp. has multiple business lines. Because the company is big with diversified business operations, its equity beta is low, approximately

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1. (10 pt) The Conglomerate Corp. has multiple business lines. Because the company is big with diversified business operations, its equity beta is low, approximately 0.8. The company enjoys a lower cost of equity than the average firm. The company is entirely funded by equity, so its cost of equity is also its cost of capital. The company's CEO believes that the company should invest more in high beta projects to take advantage of its lower cost of capital compared to its pure- play peers in those risky businesses. Do you agree with the company's CEO? Briefly describe your reasoning. 1. (10 pt) The Conglomerate Corp. has multiple business lines. Because the company is big with diversified business operations, its equity beta is low, approximately 0.8. The company enjoys a lower cost of equity than the average firm. The company is entirely funded by equity, so its cost of equity is also its cost of capital. The company's CEO believes that the company should invest more in high beta projects to take advantage of its lower cost of capital compared to its pure- play peers in those risky businesses. Do you agree with the company's CEO? Briefly describe your reasoning

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