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QUESTION TWO (6 Marks) Mt. Meru Capital, an all-equity firm, currently has a beta of 1.25 . and RF=7%, and rM=14%, suppose the firm sells

image text in transcribed QUESTION TWO (6 Marks) Mt. Meru Capital, an all-equity firm, currently has a beta of 1.25 . and RF=7%, and rM=14%, suppose the firm sells 10% of its assets (beta =1.25 ) and purchases the same proportion of new assets with a beta of 1.1. What will be the firm's new overall required rate of return, and what rate of return must the new assets produce in order to leave the stock price unchanged

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