Suppose stock in Samsung Corporation has a beta of 0.80. The market risk premium is 6%, and the risk-free rate is 6%. Sa

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Suppose stock in Samsung Corporation has a beta of 0.80. The
market risk premium is 6%, and the risk-free rate is 6%. Samsung’s
last dividend was €1.20 per share, and the dividend is expected to
grow at 8% indefinitely. The stock currently sells for €45 per
share. Samsung has a target debt-equity ratio of 0.50. It’s cost of
debt is 9%. Please ignore taxes for the purpose of this
exercise.
1. Under what circumstances would it be appropriate for Samsung
Corporation to use different costs of capital for its different
operating divisions? What are two techniques you could use to
develop a rough estimate for each division’s cost of capital?