Question
A firm has an average return on assets employed of 12% and is considering purchasing a new asset. The new asset is expected to generate
A firm has an average return on assets employed of 12% and is considering purchasing a new asset. The new asset is expected to generate cash flows of $30,000 per year for the next 8 years but these have a beta coefficient of 1.3 compared to the portfolio return of the other assets. The risk free rate of return is 2%.
What is the risk adjusted required rate of return?
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International financial management
Authors: Jeff Madura
12th edition
1133947832, 978-1305195011, 978-1133947837
