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A new project has a beta of 1.8 and makes up 80% of the firm's total investments after it was selected. What is the firms
A new project has a beta of 1.8 and makes up 80% of the firm's total investments after it was selected. What is the firms new asset beta?
Information given:
WACC of 14.21%
capital structure: 30% debt with a cost of 6% and a beta of 0.2
equity cost of 18.76%.
Market return:14%
risk-free rate: 4%.
The firm decided to invest in three projects, having 30% in project 1 (with a beta of 1.3), 30% in project 2 (with a beta of 0.75), and 40% in project 3 (with a beta of 1.5).
Tax rate of 40%.
Please show work and round answer to 2 decimal places! Thanks!
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