The Following Information Is Provided for the Delta Corporation (Amounts

question 39

Multiple Choice

The following information is provided for the Delta Corporation (amounts are in millions) :
-Refer to the information above. The expected return on the market is 11%, and the relevant risk-free rate is 6.5%. Delta's equity beta is 0.8, and the beta of its debt is 0.2. Cash flows are
Expected to grow indefinitely at 6% from 2011. Delta uses 1/3 debt financing and 2/3 equity
Financing. What is the fair market value of the firm? Round your answer to the nearest
Hundred thousand dollars.

• A)$5.0 million
• B)$106.2 million
• C)$178.0 million
• D)$94.1 million

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Definitions:

Direct Expense

Expenses that can be directly attributed to the production of specific goods or services, such as materials and labor.

Sales Salaries

Compensation paid to employees directly involved in the sales function of a business, typically comprising both base salary and commissions.

Administrative Expense

Expenses related to the general operation of a business, including salaries of executive personnel, accounting and legal services, and insurance.

Janitorial Services

A category of services that includes cleaning, maintaining, and often securing commercial or residential buildings.