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Your firm has a beta of 0.5 and just paid a dividend of $1.20 that is expected to grow at 4%. You are considering making
Your firm has a beta of 0.5 and just paid a dividend of $1.20 that is expected to grow at 4%. You are considering making an acquisition that would increase your growth rate to 6.5% and your beta to 0.8. If the risk-free rate is 2% and the market risk premium is 7%, should you make the acquisition?
A. Yes
B. No
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