Boutique Booksellers Is Considering Expanding Each of Its Five Shops

Boutique Booksellers is considering expanding each of its five shops to include a gourmet coffee shop. It has identified Javabean, a firm that is solely in the gourmet coffee shop business, as a possible acquisition. Javabean's market-beta is 1.25, and Boutique's market-beta is 1.60. The relevant risk-free rate is 3% and the risk premium is 7%. If Boutique decides to make the acquisition, 15% of its funds would be invested in gourmet coffee operations, and 85% would remain invested in its basic bookstore operation.
-Refer to the information above. If Boutique expects the gourmet coffee shop to generate additional cash flows of $50,000 a year in perpetuity, what is the maximum amount it should
Be willing to pay for Javabean? Round your answer to the nearest dollar.

A) $361,011
B) $352,113
C) $545,672
D) $425,532