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| Teaching Since: | May 2017 |
| Last Sign in: | 401 Weeks Ago, 2 Days Ago |
| Questions Answered: | 66690 |
| Tutorials Posted: | 66688 |
MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
You are considering acquiring a firm that you believe can generate expected cash flows of $14,000 a year forever. However, you recognize that those cash flows are uncertain. a. Suppose you believe that the beta of the firm is .8. How much is the firm worth if the risk-free rate is 4% and the expected rate of return on the market portfolio is 9%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of the firm $ _______ , b. How much is the overvalue of the firm if its beta is actually 1.1? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Overvalue $ _______
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