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Cranberry Inc. has the following capital structure: security beta Total Market Value ($millions) Debt .10 450 Preferred Stock .45 98 Common stock 2.03 722 1.

Cranberry Inc. has the following capital structure:

security beta Total Market Value ($millions)
Debt .10 450
Preferred Stock .45 98
Common stock 2.03 722

1. What is the firms asset beta and a assuming that CAPM is correct, what discount rate should the company set for investments that expand the scale of its operations without changing its asset beta? rf = 3%, market risk premium = 14%. Ignore taxes.

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