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Suppose Company B has a project that yields a fixed 10% return each year Suppose Risk free rate = 2% The stock market return premium

Suppose Company B has a project that yields a fixed 10% return each year

Suppose Risk free rate = 2%

The stock market return premium (Rm - Rf) is 7%, Beta = 1.3 (assume alpha = 0). All returns are on an annual basis.

What should the discount rate be?

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