The value of the cookie division is closest

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Reference no: EM131983148

Huston is all equity firm with two divisions. The diary division has an asset beta of 0.46, expects to generate free cash flow of 54 million this year, and anticipate a 4% perpetual growth rate. The cookie division has an asset beta of 0.55 expectes to generate free cash flows of 63 million this year, and anticipates a 2.5 perpetual growth rate. Suppose the risk-free rate is 2% and the market risk premium is 7%. Eestimate the value of each division:

1. The value of the diary division is closest to:

A) 4426.2

B) 1034.5

C) 1800

D) 1255.81

2. The value of the cookie division is closest to:

A) 2400

B) 923.08

C) 1342.33

D) 1880.60

3. Estimate Huston's currently equity beta. Huston's current equity beta is closest to:

A) 0.23

B) 0.45

C) 0.49

D) 0.51

4. Estimate Huston's current cost of capital. Huston's current cost of capital is closest to:

A) 4.14%

B) 4.42%

C) 5.41%

D) 5.57%

Reference no: EM131983148

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