You are considering acquiring a firm that you believe can generate expected cash flows of $11,000 a year forever. However, you recognize that those cash flows are uncertain.

"You are considering acquiring a firm that you believe can generate expected cash flows of $ 1 1, and a year forever . However, you recognize that those cash flows are uncertain . a . Suppose you believe that the beta of the firm is 0. 5 . How much is the firm worth it the risk - free rate is 3% and the expected market risk premium is TY ? ( Round your answer to the nearest cent .! The value of the firm\ 6. By how much will you misvalue the firm if it's beta is actually 0.5 ? ( Round your answer to the nearest cent . Enter your answer as positive value . ! By underestimating beta , you would overvalue *\ the firm by 5