20.Weston Enterprises is an all-equity firm with two divisions. The soft drink division has an asset beta of 0.54, expects to generate free cash flow of $66 million this year, and anticipated a 3% perpetual growth rate. The individual chemicals division has an asset beta of 1.15, expects to generate free cash flow of $71 million this year, and anticipates a 4% perpetual growth rate. Suppose the risk-free rate is 2% and the market premium is 5%. Estimate the value of each division.
The estimated value of the soft drink division is $70.3 million and the estimated value of the industrial chemicals division is $76.3 million.
The estimated value of the soft drink division is $3,882.4 million and the estimated value of the industrial chemicals division is $1,893.3 million.
The estimated value of the soft drink division is $3,796.2 million and the estimated value of the industrial chemicals division is $8,774.5 million.
The estimated value of the soft drink division is $1,893.3 million and the estimated value of the industrial chemicals division is $3,882.4 million.