Based on the information given, if the risk-free rate of interest is 3% and the market risk premium is 5%.DivisionAsset BetaFree Cash Flows ($m)Expected Growth RateOil Exploration1.44504.0%Oil Refining1.15252.5%Gas & Convenience Stores0.86003.0% The total value of the firm is closest to:A.$15,000B.$37,000C.$21,500D.$31,250

The total value of the firm can be calculated by summing the values of each division. The value of each division can be calculated using the Gordon Growth Model, which states that the value of a firm (or in this case, a division) is equal to its free cash flows divided by the difference between its cost of capital and its growth rate.

The cost of capital can be estimated using the Capital Asset Pricing Model (CAPM), which calculates the expected return (or cost of capital) for an investment given its systematic risk (beta), the risk-free rate, and the market risk premium.

The formula for CAPM is:

Cost of Capital = Risk-free rate + Beta * Market risk premium

For each division, we can calculate the cost of capital, substitute this and the given values for the free cash flows and growth rate into the Gordon Growth Model to find the value of the division, and then sum these values to find the total value of the firm.

1. Oil Exploration: Cost of Capital = 3% + 1.44 * 5% = 10.2% Value = $450 million / (10.2$7,258.06 million

2. Oil Refining: Cost of Capital = 3% + 1.15 * 5% = 8.75% Value = $250 million / (8.75$4,166.67 million

3. Gas & Convenience Stores: Cost of Capital = 3% + 0.86 * 5% = 7.3% Value = $600 million / (7.3$13,793.10 million

Total Value = $7,258.06 million +$4,166.67 million + $13,793.10 million =$25,217.83 million

Therefore, the total value of the firm is closest to $25,217.83 million. However, none of the options match this value. There might be a mistake in the question or the options provided. The closest option to the calculated value is C.$21,500 million.