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Memphic Memphic
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7 years ago
The overall value of Wyatt Oil (in $ millions) is closest to:
A) $25,000
B) $18,846
C) $31,250
D) $15,000
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
Authors:
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#1
7 years ago
C
Explanation:  C) Oil Exploration Division:
ri = rrf + β(rm - rrf) = .03 + 1.4(.05) = .10 or 10.0%
V =   =   = $7500
Oil Refining:
ri = rrf + β(rm - rrf) = .03 + 1.1(.05) = .085 or 8.5%
V =   =   = $8750
Convenience Store;
ri = rrf + β(rm - rrf) = .03 + 0.8(.05) = .07 or 7.0%
V =   =   = $15,000
Total Value = 7500 + 8750 + 15,000 = $31,250
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