You would like to value a $($non$-$traded$)$ firm by comparison with similar, traded firms.The company produces sweets in two business lines: cookies and donuts. You find information about the earnings forecast for the firm and the distribution of earnings across the two business lines

Expected earnings : $4,000,000$

Fraction of expected earnings from cookies $0\mathrm{.}65$

Fraction of expected earnings from donuts $0\mathrm{.}35$

You find information about the relevant comparison firms for the cookies and donut industries

Cookies industry

$-$ Price per share: $62$

$-$ Earning per share: $1\mathrm{.}2$

Donuts industry:

$-$ Price per share: $52\mathrm{.}25$

$-$ Earning per share: $2\mathrm{.}54$

A$-$ Calculate the expected value of the firm using the following steps.

$$ Calculate the firm's expected earnings in each line of business $($i$.$e$.$ cookies, donuts$).$

$$ Calculate the price$-$earnings$-$ratio of each comparison firm.

$$ Assume that the price$-$earnings$-$ratio is identical for all firms operating in a given line of business. Us this assumption and your previous results to calculate the expected value of the firm.

$($b$).$ The information above refers to the year $2021$ when the firm was financed with $100$ million in debt. Suppose that the asset values of the firm increased by $10\%$ from $2021$ to $2022$ and that debt is unchanged. Compute the percentage increase in the value of equity.