Weston Enterprises is anall-equity firm with two divisions. The soft drink division has an asset beta of 0.69, expects to generate free cash flow of $62 million thisyear, and anticipates a 4% perpetual growth rate. The industrial chemicals division has an asset beta of 1.03, expects to generate free cash flow of $47 million thisyear, and anticipates a 2% perpetual growth rate. Suppose therisk-free rate is 4% and the market risk premium is 4%.

a. Estimate the value of each division.

The cost of capital for the soft drink division is _________% (Round to 2 decimal places)

The value of the soft drink division is $________million (Round to one decimal place)

The cost of capital for the industrial chemicals division is _____% (Round to 2 decimal places)

The value of the industrial chemicals division is $________million (Round to 1 decimal place )

b. EstimateWeston's current equity beta

Westons current equity beta is ________ (Round to 2 decimal places)

c. EstimateWeston's current cost of capital. Is this cost of capital useful for valuingWeston's projects? How isWeston's equity beta likely to change overtime?

Westons current cost of capital is ________% (Round to 2 decimal places)