Expected return on the equity market

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At the end of March of 2016, you received an email from your boss stating that as a reward for your hard work, the firm has promised to pay you $20,000 at the end of their calendar year. Provide a specific equation, with all of the necessary inputs that should be used to estimate the value of this promise at the end of March of 2016? Assume the firm's asset beta equals 1.0, their debt beta equals 0.4, their equity beta equals 1.2, the market rate on the one-year Treasury Bond is 0.5%, and the expected return on the equity market (Rm) is 8%/year. Explain the reasoning behind the logic of your method.

Reference no: EM132288706

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