The total market value of the common stock of the okf real, Ask an Expert

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The total market value of the common stock of the OKF Real Estate Company is $6 million, and the total value of its debt is $4 million. The treasurer estimates that the beta of the stock is currently 1.5 and that the expected risk premium on the market is 6%. The Treasury bill rate is 4%. Assume for simplicity that OKF debt is risk-free and the company does not pay tax. What is the required return on OKF stock? Estimate the company's cost of capital. Suppose the company wants to diversify into the manufacture of rose-colored spectacles. The beta of unleveraged optical manufacturers is 1.2. Estimate the required return on OKF's new venture.

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Financial Management, Finance

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