The blue company has three divisions, each of approximately the same size. The financial staff has estimated the rate of return for different states of nature as given below:

			Division rate of return
State of the world	Subjective probability	Market Return	Division 1	Division 2	Division 3
Great	0.25	0.35	0.4	0.60	0.2
Good	0.25	0.20	0.36	0.30	0.12
Average	0.25	0.13	0.24	0.16	0.08
Horrible	0.25	-0.08	0.00	-0.26	-0.02

Required

1. If the risk free rate is 9%, what rate of return does the market require for each division?
2. What is the beta of the entire company?
3. Which division should be kept? Which should be spun off?
4. What will be the company's beta if the actions in part are undertaken?