I am buying a firm with an expected perpetual cash flow of $700 but am unsure of its risk. If I think the beta of the firm is zero, when the beta is really 1, how much more will I offer for the firm than it is truly worth? Assume the risk-free rate is 7% and the expected rate of return on the market is 14%.

Present value of the firm if beta equals 0 (zero)

$

Present value of the firm if beta equals 1 (one)

$

Present value difference (Input the amount as a positive value.)

$