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Consider the following firm with a capital structure of 15% debt, 80% equity and 5% preferred stock. The oustanding debt has a yield-to-maturity of 4%, whearas both regular equity and preferred equity are currently priced at $100. The regular annual dividends are expected to be $5 next year growing at 2% annually. Preferred dividends are $4.75 per year. The firm pays 20% in taxes. Based on this information, what is the overall firm beta of this firm, given a risk free rate of return of 2% and an expected return on the market portfolio equal to 8%?

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Financial Management, Finance

Category:- Financial Management
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