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Please show all work. These cash flows include all acquisition effects. Comfy's cost of equity is 12%, its beta is 1.0, and its cost of
Please show all work.
These cash flows include all acquisition effects. Comfy's cost of equity is 12%, its beta is 1.0, and its cost of debt is 8%. The risk-free rate is 5%. a. What discount rate should be used to discount the estimated cash flow? (Hint: Use Comfy's cost of equity to determine the market risk premium.) b. What is the dollar value of Mega to Comfy's shareholders? ANSWER aStep by Step Solution
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