You have been asked to estimate the beta of a high-technology firm that has three divisions with

Question:

You have been asked to estimate the beta of a high-technology firm that has three divisions with the characteristics shown in Table.
a. What is the beta of the equity of the firm?
b. If the risk-free return is 5% and the spread between the return on all is 5.5%, estimate the for the software division.
c. What is the for the entire firm?
d. to equity investors in the current year (FCFE) for the entire firm is $7.4 million and for the software division is $3.1 million. If the total firm and the software division are expected to grow at the same 8% rate into the foreseeable future, estimate the market value of the firm and of the softwaredivision.

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