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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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