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Mathematics, 18.11.2020 14:00 babas97

Firm A, which is considering a vertical merger with another firm, Firm T, currently has a required return of 13 percent. The required return of the target firm, Firm T, is 18 percent. The expected return on the market is 12 percent and the risk-free rate is 6 percent. Assume the market is in equilibrium. If the combined firm will be one and one-half times as large as the acquiring firm using book values what will be the beta of the new merged firm?

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