CAN I PLEASE HAVE ANALYTICAL CALCULATIONS IN SOLUTIONS?

THANKS IN ADVANCE

AllFlix Inc. appointed you as the new Valuation Managing Director. AllFlix Inc. is a group of three providers of on-demand internet streaming media; a) DramaFlix, a company that streams only drama movies, b) HorrorFlix specializing in streaming horror movies, and c) DocFlix, a company that streams documentaries about nature and outdoor activities. The table below provides some key details of the three businesses and the consolidated company: DramaFlix HorrorFlix DocFlix AllFlix Operating Income (next year) 110 36 55 201 After-tax Operating Income (next year) 70 29 35 134 Revenues 450 350 420 1,220 Invested Capital 450 360 130 940 Effective tax rate 36% 20% 36% 33.13% Cost of capital 9.00% 7.00% 6.00% 8.00% Expected Growth Rate 2.00% 2.00% 2.00% 2.00% 1. Taking into consideration the combined company's cost of capital and cash flows, calculate the value of AllFlix as a consolidated company. 2. Taking into consideration the industry average cost of capital for each division and the divisional cash flows, calculate the value of AllFlix as the sum of its parts. 3. Do you get different results for the value of AllFlix in Questions 1 and 2? If yes, what is the reason for this difference