What rate of return should the company require on projects

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Gamma Biosciences is financed entirely with equity. Its beta is 1.5, and its price-earnings ratio is 16. The current risk-free rate is 8 percent, and the expected return on the market is 14 percent.

a. What rate of return should the company require on projects of average risk?

b. If a new project has a beta of 2.0, what rate of return should the company require?

Reference no: EM131337391

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