CBmE+195+-+Chemical+Engineering+Economics+-+Problem+Set+_4+-+Fall+2010

CBmE+195+-+Chemical+Engineering+Economics+-+Problem+Set+_4+-+Fall+2010

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University of California at Berkeley Department of Chemical and Biomolecular Engineering Chemical and Biomolecular Engineering 195 Special Topics – Chemical Engineering Economics Fall 2010 PROBLEM SET #4 – Due October 26, 2010 at the start of class 14. Amalgamated Products has the following operating divisions: Division Revenues (% of Total Revenues) Chemicals 20 Polymers 30 Food Additives 50 To estimate the cost of capital for each operating division, management has identified the following three competitors: Estimated Competitor Equity Beta Debt/(Debt + Equity) Consolidated Chemicals 1.2 0.4 Mongo Macromolecules 1.6 0.2 Foods & Flavors 0.8 0.3 a) Assuming that the debt of all of these companies is risk- free, estimate the asset beta for each of Amalgamated Products’ divisions. b) Assume that Amalgamated Products’ debt to (debt plus equity) ratio equals 0.4. What is Amalgamated Products’ equity beta? c)
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This note was uploaded on 01/23/2011 for the course CHM ENG 195 taught by Professor ? during the Fall '10 term at University of California, Berkeley.

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CBmE+195+-+Chemical+Engineering+Economics+-+Problem+Set+_4+-+Fall+2010

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