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You are considering acquiring a firm that you believe can generate a cash flow of $120,000 next year and the cash flows will grow at

You are considering acquiring a firm that you believe can generate a cash flow of $120,000 next year and the cash flows will grow at a 3% rate forever. The firm is available for sale for $1,300,000. Assume that the beta of the firm is 1.2 the risk-free rate is 4 percent and the expected market risk premium is 7 percent.

Would you buy the firm for $1,300,000?

Group of answer choices

It depends on the IRR

No

Yes

It depends on the management of the firm

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