How much more will offer for the firm than is truly worth

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Problem 1: Assume that the risk-free rate of interest is 3% and the expected rate of return on the market is 16%. You are buying a firm with an expected perpetual cash flow of $3,000 but am unsure of its risk. If think the beta of the firm is 0.7, when in fact the beta is really 1.4, how much more will offer for the firm than it is truly worth?

Reference no: EM132893503

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