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Assume M&M holds. Your firm has a total enterprise value of $200m. Its publicly traded equity has a market value of $100m and its publicly
Assume M&M holds. Your firm has a total enterprise value of $200m. Its publicly traded equity has a market value of $100m and its publicly traded debt has a market value of $100m. The expected return on the firms equity is 20% and the expected return on the firms debt is 5%. The equity beta is 1.3 and the debt beta is 0.6. The risk free rate is 5%. Assume there are no taxes. What is the firms overall expected return?
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