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A company has a gearing ratio of 1:3. Its cost of equity capital is 20% and its cost of debt is 10%. If E(rM) =12%

A company has a gearing ratio of 1:3. Its cost of equity capital is 20% and its cost of debt is 10%. If E(rM) =12% and rF = 7%, what is the company's asset beta?

Outline any assumptions you have made in your answer.

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