The total market value of Muskoka Real Estate Company is $6 million and the total value of
Question:
a. What is the required rate of return on Muskoka stock?
b. What is the beta of the company's existing portfolio of assets? The debt is perceived to be virtually risk-free.
c. Estimate the weighted-average cost of capital assuming a tax rate of 40%.
d. Estimate the discount rate for an expansion of the company's present business.
e. Suppose the company wants to diversity into the manufacture of rose-coloured glasses. The beta of optical manufacturers with no debt outstanding is 1.2. What is the required rate of return on Muskoka's new venture?
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Related Book For 
Fundamentals of Corporate Finance
ISBN: 978-1259024962
6th Canadian edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim
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