DataMaApp Acquisitions (11 marks) DataMaApp Inc. wishes to take some of the money made by going public to purchase one of its competitors. It is believed DataMaApp can generate expected cash flows of $10,000 a year forever from this acquisition. The firm being considered for purchase has a believed beta of 0.4. How much is the firm worth if the risk-free rate is 5% and the expected market risk premium is 7%? (5 marks). You find out later that the beta is actually 0.6. How much did DataMaApp mis-value the firm by? (6 marks). (Hint: This uses Chapter 5 and Chapter 12 material primarily Chapter 12). Another option being considered is a purchasing a security that has a risk-free rate of 4%, an expected market risk premium is 7% and a beta of 1.25. If the expected rate of return is 11%, is the security overpriced or underpriced? Why or why not? (Hint: This uses Chapter 12 material)