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The beta of ABC Company is 1.2, and the company is 100% equity financed. Assume a risk-free rate of 4% and a market risk premium
The beta of ABC Company is 1.2, and the company is 100% equity financed. Assume a risk-free rate of 4% and a market risk premium of 8%. Required: a) What is the appropriate discount rate for ABC Company? Discuss b) Due to the different level of risk involved, ABC has decided to apply the cost of capital of 10% to these 3 independent projects which last one year and cost $100,000 each. Which project should the company select? Discuss
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