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75 million shares, share price 25$, R_f=6,5%, b=0,95, R_m - R_f=8,4%. Find required rate of return on equity?


Suppose Swift Meat Processors is considering building a new meat processing facility in Omaha, Nebraska. Swift has 75 million common shares outstanding. The share price is $25. Assume r_f = 6.5%, b = 0.95 and R_m - R_f = 8.4%. Estimate Swift's required return on its equity investment in the new facility.

Required rate of return=r_f+(R-m-r_f)*b=
6.5+8.4*.95=14.48%

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