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Problem 2 The market value of the equity in Bayside PLC, an engineering firm, is...

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Finance

Problem 2 The market value of the equity in Bayside PLC, an engineering firm, is 60m and the market value of its debt is 30m. The beta of the equity is 1.2 and the expected market risk premium on the market is 8 percent. The risk-free rate of interest has been estimated at 4.5% and Bayside can borrow at this rate. The corporate tax rate is 30%(a) What is the required return on Bayside's equity? (b) Estimate the firms cost of capital?

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