Use the following information to answer the question(s) below.

The risk-free rate of interest is 3% and the market risk premium is 5%.

1) The cost of capital for the oil exploration division is closest to: A) 6.0% B) 7.0% C) 8.5%

D) 10.0%

2) The cost of capital for the oil refining division is closest to: A) 6.5% B) 7.0% C) 8.5%

D) 10.0%

3) The value of the oil exploration division is closest to: A) $4,500 B) $7,500 C) $8,750

D) $10,000 Hint: V =

4) The value of the gas and convenience store division is closest to: A) $4,500 B) $6,000 C) $8,600

D) $15,000 Hint: V =

Division	Beta	Next Period's Expected Free Cash Flow ($mm)	Expected Growth Rate
Oil Exploration	1.4	450	4.0%
Oil Refining	1.1	525	2.5%
Gas & Convenience Stores	0.8	600	3.0%