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How much is the firm worth if risk-free rate three percent

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Reference no: EM132600601

You are considering acquiring a firm that you believe can generate expected cash flows of $40,000 a year forever. However, you recognize that those cash flows are uncertain.

Question 1: With a beta of .5, how much is the firm worth if the risk-free rate is 3% and the expected market risk premium is 6%?

Question 2: If it turns out that the beta is actually.

Question 3: Did you overvalue or undervalue the firm?

Question 4: By how much did you overvalue/undervalue the firm?

Reference no: EM132600601

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