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August 31, 2015

Homework Help: Economics

Posted by rok on Saturday, August 15, 2009 at 9:29am.

Sun State Mining Inc., an all-equity firm, is considering forming a new division that will increase the firm's assets by 50%. Sun State currently has a required return of 18%, U.S. Treasury bonds yield 7%, and the market risk premium is 5%. If Sun State wants to reduce its required return to 16%, what is the maximum beta coefficient the new division could have?
a. 2.2
b. 1.0
c. 1.8
d. 1.6
e. 2.0

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