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please give me proper answer as soon as possible please don't post answer on excel please solve it properly Am A is a company that
please give me proper answer as soon as possible please don't post answer on excel please solve it properly
Am A is a company that runs a successful Rail Transport operation. The total market value of the common stock of the company is $10 million and the total value of its debt is $6 million. The treasurer of Firm A estimates that the beta of the stock is currently 1.5 and the expected risk premium on the market is 6%. The risk free rate is 4%. Assume for simplicity that Firm A's debt is risk free and that the firm does not pay taxes. a. What is the required return on Firm A's stock? O b. Calculate the company cost of capital for Firm A. 4 c. What discount rate is ideal to use for an expansion of Firm A's present business? d. Suppose that Firm A wants to diversify into a retail business. It identifies that the unlevered O beta of a Firm B (which runs a retail business) is 1.2. Calculate the required return on Firm A's new businessStep by Step Solution
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