Estimate the percentage return on equity of alpha inc


Two firms, Alpha, Inc., and Beta, Inc., are in the same business. Alpha, Inc., has debt that is viewed by the market as risk-less with a market value of $500 million. Beta, Inc., has no debt. Both firms are expected to generate cash flows of $100 million per year for the foreseeable future and the market value of the equity of Beta, Inc is $1000 million. Estimate the percentage return on equity of Alpha, Inc. Assume there are no taxes, and the risk-free rate is 5.00%. (Allow two decimals in the percentage but do not enter the % sign.)

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Financial Management: Estimate the percentage return on equity of alpha inc
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