In the face of disappointing earnings results and increasingly assertive institutional stockholders, Eastman Kodak was considering the sale of its health division, which earned $560 million in earnings before interest and taxes in 1993, on revenues of $5.285 billion. The expected growth in earnings was expected to moderate to 6% between 1994 and 1998 and to 4% after that. Capital expenditures in the health division amounted to $420 million in 1993, while depreciation was $350 million. Both are expected to grow 4% a year in the long term. Working capital requirements are negligible. The average beta of firms competing with Eastman Kodak's health division is 1.15. While Eastman Kodak has a debt ratio (D/D+E]) of 50%, the health division can sustain a debt ratio (D/[D+E]) of only 20%, which is similar to the average debt ratio of firms competing in the health sector. At this level of debt, the health division can expect to pay 7.5% on its debt before taxes. (The tax rate is 40%, and the treasury bond rate is 7%.) A) Estimate the cost of capital for the division. B) Estimate the value of the division. C) Why might an acquirer pay more than this estimated value for the division