Question
I am buying a firm with an expected perpetual cash flow of $1,450 but am unsure of its risk. If I think the beta of
I am buying a firm with an expected perpetual cash flow of $1,450 but am unsure of its risk. If I think the beta of the firm is zero, when the beta is really 1, how much more will I offer for the firm than it is truly worth? Assume the risk-free rate is 5% and the expected rate of return on the market is 20%. (Input as a positive number)
What is the present value difference?
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Fundamentals Of Futures And Options Markets
Authors: John C. Hull
5th Edition
0131445650, 9780131445659
