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Investors expect the market rate of return in the coming year to be 12%. The T-bill rate is 4%. XYZ's stock has a beta of
Investors expect the market rate of return in the coming year to be 12%. The T-bill rate is 4%. XYZ's stock has a beta of 0.5. The market value of its outstanding equity is $200 million. Suppose now that the company wins a major lawsuit during the year. The settlement is $5 million. The company's stock return during the year turns out to be 5%. Assuming that the magnitude of the settlement is the only unexpected firm-specific event during the year, what is the settlement the market previously expected XYZ to receive from the lawsuit?
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