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BETA AND THE REQUIRED RATE OF RETURN pany with three the subsidiaries (and their respective betas) are as follows: HPI Corporation is a holding com- main subsidiaries. The percentage of its capital invested in each of ST-3 Subsidiary Technology services Application services Commercial hardware Percentage of Capital 65% 25 10 Beta 0.80 1.10 125 a. What is the holding company's beta? b. If the risk-free rate is 5% and the market risk premium is 65%, what is the holding company's required rate of return? c. HPI is considering a change in its strategic focus; it will reduce its reliance on the technology services subsidiary, so the percentage of its capital in this sub- sidiary will be reduced to 50%. At the same time, it will increase its reliance on the commercial hardware division, so the percentage of its capital in that subsidiary will rise to 25%. What will the company's required rate of return be after these changes