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How much more will offer for the firm

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Question - Assume that the risk-free rate of interest is 3% and the expected rate of return on the market is 16%. 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 0.7, when in fact the beta is really 1.4, how much more will I offer for the firm than it is truly worth?

Reference no: EM132938609

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