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Two firms, Alpha, Inc., and Beta, Inc., are in the same business. Alpha, Inc., has debt that is viewed by the market as risk-less with a market value of $500 million. Beta, Inc., has no debt. Both firms are expected to generate cash flows of $100 million per year for the foreseeable future and the market value of the equity of Beta, Inc is $1000 million. Estimate the percentage return on equity of Alpha, Inc. Assume there are no taxes, and the risk-free rate is 5.00%. (Allow two decimals in the percentage but do not enter the % sign.)

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92400227

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