Genedak-Hogan Cost of Equity.Use the table in the popup window, to answer the problem. Genedak-Hogan (G-H) is an American conglomerate that is actively debating the impacts of international diversification of its operations on its capital structure and cost of capital. The firm is planning on reducing consolidated debt after diversification. Senior management at Genedak-Hogan is actively debating the implications of diversification on its cost of equity. All agree that the company's returns will be less correlated with the reference market return in the future, the financial advisors believe that the market will assess an additional 3.3% risk premium for "going international" to the basic CAPM cost of equity. Calculate Genedak-Hogan's cost of equity before and after international diversification of its operations, with and without the hypothetical additional risk premium, and comment on the discussion.

Before Assumptions Symbol Diversification Correlation between GH and the market Standard deviation of G-H's returns Standard deviation of market's returns Risk-free rate of interest Additional equity risk premium for internationalization Estimate of G-H's cost of debt in U.S. market Market risk premium Corporate tax rate Proportion of debt Proportion of equity What is Genedak-Hogan's cost of equity before international diversification of its operations without the hypothetical additional risk premium? % (Round to two decimal places.) What is Genedak-Hogan's cost of equity before international diversification of its operations with the hypothetical additional risk premium? (Round to two decimal places.) What is Genedak-Hogan's cost of equity after international diversification of its operations without the hypothetical additional risk premium? % (Round to two decimal places.) What is Genedak-Hogan's cost of equity after international diversification of its operations with the hypothetical additional risk premium? % (Round to two decimal places.) "When G-H's beta is recalculated, it falls in value as a result of the reduced correlation of its returns with th home market (diversification benefit). This then creates a standard cost of equity which is cheaper. If, however, the market was to add an additional risk premium to the firm's cost of equity as a result of internationally diversifying operations, the final risk-adjusted cost of equity tends to be higher." The above statement is (Select from the drop-down menu.) Options: TRUE OR FALSE