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Your firm is considering to open a new factory in Germany. The factory will require an investment of 1,000 per year now and in the
Your firm is considering to open a new factory in Germany. The factory will require an investment of 1,000 per year now and in the next three years. In years four through 10 it will yield profits of 500, followed by profits of 800 in years 11 through 20. (You plan to shut down the factory at no cost in year 21.) To raise funding for the factory, you are planning to sell new shares to your shareholders, who follow the CAPM model. The firms actual beta with the market is 0.8. The annual yield on a 20-year German government bond is 2%. Will you obtain funding for your project if shareholders believe the future equity risk
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