Chris paid $100,000 for a single-family home on July 1, 2019, and immediately placed it in service as residential rental propert
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Answer:
The correct solution is "$6,564.01". A further solution is given below.
Explanation:
The given values are:
beta,
= 1.6
market return,
= 15%
cash flow,
= $2,000
risk free rate of interest,
= 3%
Now,
The stock return will be:
=
=
=
The actual worth of the firm will be:
=
=
=
=
With 0.8 beta, the stock return will be:
=
=
=
So that I'm paying for the firm,
=
=
= ($)
Hence,
I'm paying,
=
= ($)