The prevailing risk-free rate is 5% per annum. A competitor to your own firm, though publicly traded,
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The prevailing risk-free rate is 5% per annum.
A competitor to your own firm, though publicly traded, has been using an overall project cost of capital of 12% per annum. The competitor is financed by 1/3 debt and 2/3 equity.
This firm has had an estimated levered beta of 1.5. What is it using as its equity premium estimate?
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