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Corporate Financial Strategies (General Motors Corp.
1. Estimate GMs cost of equity using data in the case.
2. Estimate the cost of equity for: (a) the automotive division, (b) General Motors Acceptance Corporation, (c) Hughes Aircraft (GMHE), and (d) Electronic Data Systems.
3. Critique GM’s investment decisions.
4. Is there a different Interdivisional effect of GM’s decision to offer 2.9% loans instead of, say, cutting unit prices? What are the possible benefits from this strategy and does it impact GM’s stock price?
Note: GMC, the automotive division, is different from G.M. (Corporate) which is the combined entity. As such the beta of G.M. (Corporate) on page 10 is not for the automotive division. That beta can be worked out from other information in the case.