Problem $12-6$ CAPM and Valuation $($LO$2)$

You are considering acquiring a firm that you believe can generate expected cash flows of $$14,000$ a year forever. However, you recognize that those cash flows are uncertain.

a$.$ Suppose you believe that the beta of the firm is $\mathrm{.}8.$ How much is the firm worth if the risk$-$free rate is $4\%$ and the expected rate of return on the market portfolio is $9\%?($Do not round intermediate calculations. Round your answer to $2$ decimal places.$)$

Value of the firm

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b$.$ How much is the overvalue of the firm if its beta is actually $11?($Do not round intermediate calculations. Round your answer to $2$ decimal places.$)$

Overvalue

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