ST-3 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 subsidi- aries (and their respective betas) are as follows: Subsidiary Electric utility Cable company Percentage of Capital Beta 60% 0.70 25 0.90 Real estate development 10 1.30 International/special projects 5 1.50 a. What is the holding company's beta? b. If the risk-free rate is 6% and the market risk premium is 5%, what is the holding company's required rate of return? C. 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 company's required rate of return be after these changes