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Amazonas has three operating divisions: AZ capital (40%), AZ Technology (30%) and AZ Energy (30%). The CFO wants to estimate the cost of capital for
Amazonas has three operating divisions: AZ capital (40\%), AZ Technology (30\%) and AZ Energy (30\%). The CFO wants to estimate the cost of capital for each division, to help with capital budgeting. Amazonas is financed 50% by debt, with D=.15. The current risk-free interest rate is 5% and the expected market return is 10%. The following three competitors have investments similar to those of Amazonas three divisions (with debt practically risk-free): (a) What is the cost of capital for each division? (b) What is Amazonas equity beta
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