I am buying a firm with an expected cash flow of $ 1,000 but am unsure of

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I am buying a firm with an expected cash flow of $ 1,000 but am unsure of its risk. If I think the beta of the firm is 0.5, when in fact the beta is really 1, how much more will I offer for the firm than it is truly worth?

Assume that the risk- free rate of interest is 6 percent and the expected rate of return on the market is 16 percent.

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Investments

ISBN: 978-0071338875

8th Canadian Edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus, Stylianos Perrakis, Peter

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Question Posted: Jun 21, 2015 03:39 AM

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I am buying a firm with an expected cash flow of $ 1,000 but am unsure of

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Assume that the 1000 is a perpetuity If beta is 5 the c...View the full answer

Investments

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