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BTS corporation has two investment plans A,B and expected to get $1200 of cash flow in 1 year. The investment plan A's is 1.0 and

BTS corporation has two investment plans A,B and expected to get $1200 of cash flow in 1 year. The investment plan A's is 1.0 and plan b is 1.5. If the risk-free interest rate is 10% and market risk premium is 10%, please answer the following question.

Beta fo BTS = (1+1.5)/2 = 1.25
Required return = 10%+1.5*10% = 25.00%
PV for BTS = 1200/1.25 = $ 960.00
Note:
It is assumed that the cash flow of $1,200
is for both the projects put together.
If it is for investment plan, then PV for BTS = 2400/1.25 =

$ 1,920.00

question. explain why the statement is regarded as value additivity principle

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