Look back at project A in Section 9.6. Now assume that a. Expected cash flow is $150

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Look back at project A in Section 9.6. Now assume that

a. Expected cash flow is $150 per year for five years.

b. The risk-free rate of interest is 5 percent.

c. The market risk premium is 6 percent.

d. The estimated beta is 1.2. Recalculate the certainty-equivalent cash flows, and show that the ratio of these certainty-equivalent cash flows to the risky cash flows declines by a constant proportion each year.

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Principles of Corporate Finance

ISBN: 978-0072869460

7th edition

Authors: Richard A. Brealey, Stewart C. Myers

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Question Posted: Jun 08, 2011 04:26 AM

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Look back at project A in Section 9.6. Now assume that a. Expected cash flow is $150

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The opportunity cost of capital is given by r r f r m r f 00...View the full answer

Principles of Corporate Finance

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