If beta is given for the company and not the division's how would you calculate the divisional beta for each division? For example,
INPUTS USED IN THE MODEL
Company Data
Common Stock:
Current Price of Common Stock
$92.86
Beta
1.13
Common Stock Dividend, recently paid
$1.00
Earnings per share, recent
$6.25
ROE
4.725%
Company risk premium
2.0%
Debt:
Pre-tax cost of debt
3.36%
Tax rate
26%
Capital Structure:
Target capital structure for common stock
75%
Target capital structure for debt
25%
Market Data
90-day Treasury Bill Rate
0.35%
10-year Treasury Bond Rate
1.92%
Expected Market Dividend
$61
Current Market Index Value
$4,287
Expected long-term US GDP growth rate
3.6%
2. Estimate GE's divisional cost of equity and divisional cost of capital
Division
Weight (measured as % of GE's total Sales)
Divisional Beta
Divisional Cost of Equity
Divisional Cost of Capital
Healthcare
45%
Aviation
44%
Power Generation
11%
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