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Weston Enterprises is an all-equity firm with two divisions. The soft drink division has an asset beta of 0.56, expects to generate free cash flow of $63 million this year, and anticipates a 4% perpetual growth rate. The industrial chemicals division has an asset beta of 1.15, expects to generate free cash flow of $47 million this year, and anticipates a 3% perpetual growth rate. Suppose the risk-free rate is 2% and the market risk premium is 5%. a. Estimate the value of each division. b. Estimate Weston's current equity beta c. Estimate Weston's current cost of capital. Is this cost of capital useful for valuing Weston's projects? How is Weston's equity beta likely to change over time? a. Estimate the value of each division. The cost of capital for the soft drink division is %. (Round to two 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 two decimal places.) The value of the industrial chemicals division is $ million. (Round to one decimal place.) b. Estimate Weston's current equity beta. Weston's current equity beta is (Round to two decimal places.) c. Estimate Weston's current cost of capital. Is this cost of capital useful for valuing Weston's projects? How is Weston's equity beta likely to change over time? Weston's current cost of capital is %. (Round to two decimal places.) Is this cost of capital useful for valuing Weston's projects? (Select the best choice below.) A. Useful. Individual divisions are sometimes less risky and sometimes more risky than the firm's cost of capital. B. Not useful! Individual divisions are always 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. D. Not useful! Individual divisions are sometimes less risky and sometimes more risky than the firm's cost of capital. How is Weston's equity beta likely to change over time? (Select the best choice below.) O A. Over time, Weston's equity beta will decline toward 0.56, as the soft drink division has a lower growth rate and so will represent a smaller fraction of the firm. B. Over time, Weston's equity beta will rise toward 1.15, as the soft drink division has a higher growth rate and so will represent a larger fraction of the firm. C. Over time, Weston's equity beta will decline toward 0.56, as the soft drink division has a higher growth rate and so will represent a larger fraction of the firm. D. Over time, Weston's equity beta will rise toward 0.56, as the soft drink division has a higher growth rate and so will represent a larger fraction of the firm

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