Tyco Steel has decided to diversify into the home

Tyco Steel has decided to diversify into the home improvement field. As a result of thisexpansion, Tyco’s beta value drops from 1.3 to 0.9, and the expected future long-term growth ratein the firm’s dividends drops from 8 to 7%. The expected market return is 14%; the risk-free rate is7%, and the current dividends per share, D0, are $3. Should Tyco undertake the planneddiversification?

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