The expected market return is 14 percent the risk-free rate, Financial Management

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The expected market return is 14 percent the risk-free rate

Globe Steel has decided to diversify into the home improvement field. As a result of this expansion, Globe's beta value drops from 1.3 to 0.9, and the expected future long-term growth rate in the firm's dividends drops from 8 to 7 percent.

The expected market return is 14 percent; the risk-free rate is 7 percent; and the current dividends per share, D0, are $3. Should Globe undertake the planned diversification?

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Financial Management: The expected market return is 14 percent the risk-free rate

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Financial Management: The expected market return is 14 percent the risk-free rate

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