Question: Food Express is a well-established grocery chain. Computer Power is an up-and-coming computer software developer for business. Bridge Steel is an integrated steel producer, focusing

Food Express is a well-established grocery chain. Computer Power is an up-and-coming computer software developer for business. Bridge Steel is an integrated steel producer, focusing on steel for buildings and bridges. Some information about the companies was provided by an investment banking company as follows:

a. If the risk-free rate is 4% and the expected market risk premium is 7%, what is each firm worth?

b. If you owned all 3 companies, what would be the beta of your stock portfolio?

Expected Cash Flow Growth Rate Expected Cash Flow Year 1 S 7 million 2 million 10 million Years 2 to 5 Year 6 and On Beta Firm Food Express Computer Power Bridge Steel .85 3% 3% .95 8% 4% 2% 3% 1.3

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