the risk free rate is 2%

5.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 Weston’s current cost of capital.

Weston’s current cost of capital is 4.70%.

Weston’s current cost of capital is 3.70%.

Weston’s current cost of capital is 5.70%.

Weston’s current cost of capital is 2.70%.