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Idealized World with Taxes 15 DO 1 point What return do bondholders require for investing in the project? Enter your answer in percent with two
Idealized World with Taxes 15 DO 1 point What return do bondholders require for investing in the project? Enter your answer in percent with two decimals. You are the financial manager of FreshFood Inc. and you are considering a $1M investment in the travel sector. You expect after-tax cashflows of $300,000 in perpetuity. The project is financed with a debt-to-equity ratio of 1:1. The beta of the firm's debt is O, the risk-free rate is 3%, and the market return is 10%. Also, you see three competitors in the travel sector with (unlevered) asset betas of 1.3, 1.5, and 1.7; and you see three competitors in the food production industry with (unlevered) asset betas of 1.2, 1.3, and 1.4. Assume an idealized world with taxes (t=21%) and with well-functioning markets. Type your
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