Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

It is assumed that the CAPM assumptions are met.The firm Diary&Candy Inc. is an all equity firm with two independent divisions, The diary division and

image text in transcribed

It is assumed that the CAPM assumptions are met.The firm Diary&Candy Inc. is an all equity firm with two independent divisions, The diary division and the candy division. The diary division has an asset beta(also called the beta of the unlevered assets) of 0.59. The expected FCF next year (t=1) is DKK 47 million. The FCF is expected to grow 1.5% per year forever. The candy division has an asset beta of 0.67. The expected FCF next year (t=1) is DKK 59 million. The FCF is expected to grow 1% per year forever. The annual risk-free rate is 1.8% and the annual market risk premium is 6%. The firm has no excess cash.In which interval isthe enterprise value of Diary&Candy Inc.(in DKK million)?

Unknown problem no. 3 It is assumed that the CAPM assumptions are met. The firm Diary&Candy Inc. is an all equity firm with two independent divisions, The diary division and the candy division. The diary division has an asset beta (also called the beta of the unlevered assets) of 0.59. The expected FCF next year (t=1) is DKK 47 million. The FCF is expected to grow 1.5% per year forever. The candy division has an asset beta of 0.67. The expected FCF next year (t=1) is DKK 59 million. The FCF is expected to grow 1% per year forever. The annual risk-free rate is 1.8% and the annual market risk premium is 6%. The firm has no excess cash. In which interval is the enterprise value of Diary&Candy Inc. (in DKK million)? A. [4,420; 4,430) B. 11,880; 1,890) *C. 12,410; 2,490) D. 13,490 ; 3,570] E. (7,300; 7,370] F. [6,300; 6,320]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Behavioral Finance And Capital Markets

Authors: A. Szyszka

5th Edition

1137338741, 9781137338747

More Books

Students also viewed these Finance questions