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IBM is a large firm with two very different business units, and has no debt. The consumer product's unit has an asset beta of 0.67, expects to generate free cash flow of $66 million the upcoming year, and anticipates a 4% perpetual growth rate after that. The cyclical products unit has an asset beta of 1.11, expects to generate free cash flow of $78 million the upcoming year, and anticipates a 3% perpetual growth rate after that. Suppose the risk-free rate is 3% and the market risk premium is 5%. CAPM holds and ignore taxes. a. Estimate the COC and value of each business unit. b. What is IBM's beta and its COC? c. Is IBM's overall COC useful for valuing IBM's projects? a. Estimate the COC and value of each business unit. COC for Consumer Products: %. (Round to two decimal places.) Value of Consumer Products: S million. (Round to one decimal place.) COC for Cyclical Products: %. (Round to two decimal places.) Value of Cyclical Products: $ million. (Round to one decimal place.) b. What is IBM's beta and its COC? Beta COC (Round to two decimal places.) %. (Round to two decimal places.) c. Is IBM's overall COC useful for valuing IBM's projects? How do you think IBM's beta will change over time? Is this cost of capital useful for valuing IBM's projects? (Select the best choice below.) O A. Useful. Individual divisions are sometimes less risky and sometimes more risky than the firm's cost of capital. OB. Not useful! Individual divisions are sometimes less risky and sometimes more risky than the firm's cost of capital. O C. Useful. Individual divisions are always less risky than the firm's cost of capital. OD. Not useful! Individual divisions are always more risky than the firm's cost of capital

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