Q9.41. The prevailing risk-free rate is 5% per an- num. A competitor to your own firm, though
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Q9.41. The prevailing risk-free rate is 5% per an- num. A competitor to your own firm, though publicly traded, has been using an overall project cost of capital of 12% per annum. The competitor is financed by 1/3 debt and 2/3 equity. This firm has had an esti- mated equity beta of 1.5. What is it using as its equity premium estimate?
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