Question: If the market value of common stock of a real estate company is 6 million and the value of its debt is 4 million with a beta of 1.5 and the risk premium on the market is 6% and the treasury bill rate is 4% and the debt is risk free and the real estate company pays no tax
1. What is the required return on the real estate companies stock?
2. What is the companies cost of capital
3. What is the companies discount rate for and expansion of the present business
4. Suppose the company wants to diversify into making vases. The beta of manufactures of vases is 1.2 what is the required return on the companies new venture