answers:

a) unlevered beta = 1.275 levered beta= 1.371

b) mainframes = 1.18 personal computers = 16.36% software= 19.33% printers= 13.44%

c) levered beta is 1.333, unlevered beta is 1.47

The answers are provided but I don't know the steps to get these answers. please explain all steps so I can fully understand how to solve. thank you!

8. You are analyzing the beta for Hewlett Packard and have broken down the -on down the company into four broad business groups, with market values and betas for each group. Business Group Beta Mainframes Personal computers Software Printers Market Value of Equity $2.0 billion 2.0 billion 1.0 billion 3.0 billion 1.10 1.50 2.00 1.00 a. Estimate the beta for Hewlett Packard as a company. Is this beta going to be equal to the beta estimated by regressing past returns on their stock against a market index. Why or why not? b b. If the Treasury bond rate is 7.5%, estimate the cost of equity for Hewlett Packard. Estimate the cost of equity for each division. Which cost of equity would you use to value the printer division? Assume that HP divests itself of the mainframe busi- ness and pays the cash out as a dividend. Estimate the beta for HP after the divestiture. (HP had $1 bil- lion in debt outstanding.) c. d