Abc inc an all-equity firm currently has a beta of 125 and

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ABC Inc., an all-equity firm, currently has a beta of 1.25, and rf=7% and rm=14%. Suppose the firmsells 10% of its assets (beta=1.25) and purchases the same proportion of new assets with a beta of1.1. What will be the firm's new overall required rate of return, and what rate of return must the newassets produce in order to leave the stock price unchanged?

Reference no: EM13479453

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