How much more will i offer for firm than it is truly worth

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Reference no: EM132014364

Assume that the risk-free rate of interest is 3% and the expected rate of return on the market is 15%. I am buying a firm with an expected perpetual cash flow of $3,000 but am unsure of its risk. If I think the beta of the firm is 0.6, when in fact the beta is really 1.2, how much more will I offer for the firm than it is truly worth?

Amount offered in excess_________.

Reference no: EM132014364

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