What is the required rate of return on muskoka new venture

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Reference no: EM132817910

The total market value of muskoka real etstae company is $6 million and the total value od its debt is $2 million . the treasurer estimates the beta of the stock is currently 1.5 and that the expected risk premium on the market is 7 %. the treasury bill rate is 4% .

Problem 1: what is the required rate of return on mukoka stock?

Problem 2: what is the beta of the companies existing portfolio of assets? the debt is perceived to be virtual;;y risk free.

Problem 3: estimate the weighted average cost of capital assuming a tax rate of 40 %.

Problem 4: estimate the discount rate for an expansion of the company present business.

Problem 5: suppose the company wants to diversify into the manufacturer of rose coloured glass. The beta of optical manufacturers with no debt outstanding is 1.2. what is the required rate of return on Muskoka new venture.

Reference no: EM132817910

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