step by step of all equations used and explanations claearly . (a) Suppose Carter Chemical Company's management conducts...

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step by step of all equations used and explanations claearly
.     (a) Suppose Carter ChemicalCompany's management conducts a study and concludes that if Carterexpands its consumer products division (which is less risky thanits primary business, industrial chemicals), the firm's beta willdecline from 1.1 to 0.9. However, consumer products have a somewhatlower profit margin, and this will cause Carter's growth rate inearnings and dividends to fall from 7 percent to 6 percent. Shouldmanagement make the change? Assume the following:
ER_M= 10% ;  R_F=7.5%;D₀=$2.
(b)      Assume all the factsas given in part (a), except the one about the changing betacoefficient. By how much would the beta have to decline to causethe expansion to be a good one? (Hint: set P₀under thenew policy equal to P₀under the old one, and find thenew beta that produces this equality.)

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a First list down the information provided in questionFollowing steps needs to be followed to solve thequestionStep No 1Calculation of Cost of equity Ke under currentscenario without expansionAs per CAPM modelCost of Equity Ke RF bRM RF 0075 11 010 0075 0075 00275 1025Step No 2Calculation of Cost See Answer

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step by step of all equations used and explanations claearly. (a) Suppose Carter ChemicalCompany's management conducts a study and concludes that if Carterexpands its consumer products division (which is less risky thanits primary business, industrial chemicals), the firm's beta willdecline from 1.1 to 0.9. However, consumer products have a somewhatlower profit margin, and this will cause Carter's growth rate inearnings and dividends to fall from 7 percent to 6 percent. Shouldmanagement make the change? Assume the following:ERM= 10% ; RF=7.5%;D0=$2.(b) Assume all the factsas given in part (a), except the one about the changing betacoefficient. By how much would the beta have to decline to causethe expansion to be a good one? (Hint: set P0under thenew policy equal to P0under the old one, and find thenew beta that produces this equality.)