6. A company is considering to start a new business which will generate $100 per year in the next 3 years. Assume that there is no tax and all debts are risk-free. The risk-free interest rate is 4% and the market return is 10%. Find the value of the business under each of the following situations: (a) A comparison firm is identified. This firm has an equity beta 1.44 and D/E=0.8. (b) A comparison fim is identified. This firm has a dividend yield 4% and analysts' forecast of its earning growth is 8%. The D/E ratio of this firm is 0.6. (c) A comparison firm is identified. The firm has a dividend yield 3.3%, plow back ratio 30%, book return on equity 18%, and is purely equity financed. (d) There is no directly comparable firm. However, two firms are found to have divisions running similar business: Equity beta DE Comparable divisions/Total Firm 1 1.8 0.5 Firm 2 1.95 1 Assume that the other businesses of the two firms are similar. asset 0.4 0.7 6. A company is considering to start a new business which will generate $100 per year in the next 3 years. Assume that there is no tax and all debts are risk-free. The risk-free interest rate is 4% and the market return is 10%. Find the value of the business under each of the following situations: (a) A comparison firm is identified. This firm has an equity beta 1.44 and D/E=0.8. (b) A comparison fim is identified. This firm has a dividend yield 4% and analysts' forecast of its earning growth is 8%. The D/E ratio of this firm is 0.6. (c) A comparison firm is identified. The firm has a dividend yield 3.3%, plow back ratio 30%, book return on equity 18%, and is purely equity financed. (d) There is no directly comparable firm. However, two firms are found to have divisions running similar business: Equity beta DE Comparable divisions/Total Firm 1 1.8 0.5 Firm 2 1.95 1 Assume that the other businesses of the two firms are similar. asset 0.4 0.7