In 1980, Saab-Scania plans to enter the agricultural machinery industry. As part of its expansion plan, Saab-Scania is looking to acquire a company specializing in artificial intelligence-assisted industrial equipment. A potential target is AEye Lab, Inc., a private startup firm with no debt in its capital structure. Saab-Scania is evaluating AEye Labs two divisions, Software and Robotics. The analyst of Saab-Scania has collected information on historical returns on the market portfolio and the relevant industries:

Estimation period 1960 -1979

Market Portfolio:

Mean Return [] : 0.16

Variance () : 0.030

Covariance with the market:

Software industry (, ) : 0.036

Robotics industry (, ) : 0.054

Answer questions a) below. (Lecture notes p.21, and the basic thought experiment concerning the discount rate and valuation)

a) Assume that the risk-free rate is 6%. Using the information provided, determine the approximated CAPM betas for AEye Labs Software and Robotics divisions, respectively, and then calculate the required rates of return on each division.