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(d) A firm has an expected cash flow of 500 million in one year. The beta of the common stock of the firm is 0.8

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(d) A firm has an expected cash flow of 500 million in one year. The beta of the common stock of the firm is 0.8 and this cashflow has the same risk as the firm as a whole. Using a risk-free rate of 5% and a risk premium on the market portfolio of 6%, what is the present value of the cash flow? If the beta of the firm doubles, what happens to the present value of the cash flow (5 marks]

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