Estimate weston current equity beta-current cost of capital

Assignment Help Financial Management

Reference no: EM131879211

Weston Enterprises is an all-equity firm with two divisions. The soft drink division has an asset beta of 0.57, expects to generate free cash flow of $62 million this year, and anticipates a 3% perpetual growth rate. The industrial chemicals division has an asset beta of 1.03, expects to generate free cash flow of $60 million this year, and anticipates a 2% perpetual growth rate. Suppose the risk-free rate is 4% and the market risk premium is 5%.

a. Estimate the value of each division.

b. Estimate Weston's current equity beta

c. Estimate Weston's current cost of capital. Is this cost of capital useful for valuing Weston's projects? How is Weston's equity beta likely to change over time?

Round to two decimal points.

Reference no: EM131879211

Questions Cloud

List two genetic disorders : List two genetic disorders where males are affected more often than females, and two genetic disorders where males and females are affected equally.

What is the monthly payment required by both mortgages : What is the monthly payment required by both mortgages? What is the total amount paid for the 30 year and 15 year mortgages?

What arguments would you use to make the case for the policy : What arguments would you use to make the case for the policy? What argument(s) would your opponents make?

Chain rule for differentiation : What are the similarities and differences between the Chain Rule for differentiation of x^n versus the Power Rule for differentiation?

Estimate weston current equity beta-current cost of capital : Estimate the value of each division. Estimate Weston's current equity beta. Estimate Weston's current cost of capital.

How a providers personal definition of family might impact : Consider how a provider's personal definition of family and family roles might impact the assessment of a child and the child's family.

Currently needs to retain all of its earnings : Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends.

How far does he live from his? job : After work the traffic was? heavier, and he drove home at 25 mph. His driving time to and from work was 1 hour and 8 minutes. How far does he live from his? job

Half-life of the element : A superhero is rendered powerless when exposed to 55 or more grams of a certain element. A 600 year old rock that originally contained

User Account

All Pages