BETA AND THE REQUIRED RATE OF RETURN ECRI Corporation is a holding company with four main subsidiaries. The percentage of its capital invested in each of the subsidiaries (and their respective betas) are as follows:

Subsidiary	Percentage of Capital	Beta
Electric utility	60%	0.70
Cable company	25	0.90
Real estate development	10	1.30
International/special projects	5	1.50

What is the holding companys beta?

If the risk-free rate is 6% and the market risk premium is 5%, what is the holding companys required rate of return?

ECRI is considering a change in its strategic focus; it will reduce its reliance on the electric utility subsidiary, so the percentage of its capital in this subsidiary will be reduced to 50%. At the same time, it will increase its reliance on the international/special projects division, so the percentage of its capital in that subsidiary will rise to 15%. What will the companys required rate of return be after these changes?