X : 4

1. Please answer the below mentioned questions for the automotive company which produces engines, gearboxes and brakes by using the following information. Division Beta Market Value Engine 2.x $2x0 million Gearbox 1.x $3x0 million Break 0.X $4x0 million a. What is the beta of the equity for the firm? b. If the risk free rate is 6% and the spread between the return on all stocks (market risk premium) is 6.5%, estimate the cost of equity for the Engine division? e. What is the cost of equity for the entire firm? d. Free cash flow to equity investors in the current year (FCFE) for the entire firm is $8.x million and for the Engine division, it is $3.x million. If the total firm and the Engine division are expected to grow at the same x% rate into the foreseeable future, estimate the market value of the firm and of the Engine division