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Link Inc. has debt outstanding with a market value of $200 million, and equity outstanding with a market value of $660 million. The corporate tax
Link Inc. has debt outstanding with a market value of $200 million, and equity outstanding with a market value of $660 million. The corporate tax rate for Link is 30%, and its debt is considered risk free. An investment bank has provided an estimated equity beta of 1.50 for the Link Inc. Given a risk free rate (Rf) of 3% per year and an expected market return (Rm) of 12% per year, calculate the discount rate (R0) per year for a scale enhancing project in the hypothetical case that Link Inc. is all equity financed. Provide solution of R0 using two different methods. Method 1 ( 7 points) Method 2 (7 points)
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