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Sir in this case why they have multiplied Elfu Co component asset beta with 0.25 and Elfu Co asset beta of other activities with 0.75?
According to the question, 75% of Elfu’s equity is in ‘other activities’ and so 25% is in ‘component production’. It is being assumed sensibly that it is the equity that is carrying the risk.
Instead of equity can we also assume debt carrying the risk and so use 20% and 80%?
No. In theory debt is risk free. It is equity that carries the risk.