Eastern Inc. is an all-equity firm with two divisions. The cosmetic division has an asset beta...
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Eastern Inc. is an all-equity firm with two divisions. The cosmetic division has an asset beta of 0.8, expects to generate a free cash flow of $70 million by the end of this year (year 1), and anticipates a 5% perpetual growth rate. The coal mining division has an asset beta of 1.1, expects to generate a free cash flow of $239 million by the end of this year (year 1), and anticipates a 1% perpetual growth rate. Suppose the risk-free rate is 2% and the market risk premium is 5%. What is the value of cosmetic division in million dollars? Note: Please provide your answer to the nearest integer with no comma or $ sign e.g. if the answer is $1,234.56 million, type in 1235 Eastern Inc. is an all-equity firm with two divisions. The cosmetic division has an asset beta of 0.8, expects to generate a free cash flow of $70 million by the end of this year (year 1), and anticipates a 5% perpetual growth rate. The coal mining division has an asset beta of 1.1, expects to generate a free cash flow of $239 million by the end of this year (year 1), and anticipates a 1% perpetual growth rate. Suppose the risk-free rate is 2% and the market risk premium is 5%. What is the value of cosmetic division in million dollars? Note: Please provide your answer to the nearest integer with no comma or $ sign e.g. if the answer is $1,234.56 million, type in 1235
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To find the value of the cosmetic division we can use the discounted cash flow DCF approa... View the full answer
Related Book For
Auditing and Assurance Services A Systematic Approach
ISBN: 978-1259162343
9th edition
Authors: William Messier, Steven Glover, Douglas Prawitt
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