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Assume that the risk-free rate of interest is 4% and the expected rate of return on the market is 18%. I am buying a firm
Assume that the risk-free rate of interest is 4% and the expected rate of return on the market is 18%. I am buying a firm with an expected perpetual cash flow of $1,000 but am unsure of its risk. If I think the beta of the firm is 0.7, when in fact the beta is really 1.4, how much more will I offer for the firm than it is truly worth? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Amount affered excess?
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