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What is the weight of the new project in the firm

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Reference no: EM131478547

The risk-free rate is 3%, the equity premium is 6%, and the old firm is worth $100 and has a market beta of 1.5. The new project costs $10, its expected payoff is $11 next year, and has a project beta of 3.

a) What is the value of the new project, discount at its true cost of capital?

b) What is the weight of the new project in the firm?

c) What is the beta of the overall (combined) firm?

Reference no: EM131478547

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