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ABC Inc. is a levered company. Based on financial statements we know that the firm has $50 million bonds outstanding with a term to maturity of 10 years remaining and an annual coupon rate of 4%. The bonds have a face value of $1,000. These bonds have an average YTM of 5%. ABC Inc. has 100 million shares outstanding with a price of $5 per share and a beta of 1.2. Corporate tax rate is assumed to be 40%. The risk free rate is 2% and the expected return on the market portfolio is 10%. Find Ro?

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Category:- Basic Finance
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