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3. Suppose your firm is going to finance a new investment project with only retained earnings. The manager claims that since the earnings are already

3. Suppose your firm is going to finance a new investment project with only retained earnings. The manager claims that since the earnings are already being retained and that since no outside financing is required, the project should be evaluated at the risk-free rate of return, Is this appropriate? Are retained earnings risk-free? Why or why not?

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