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Rio Tinto Zinc is planning to open a mine in Bolivia The company estimates that the systematic risk of the project is 120 the riskfree rate of interest is 4 per cent and the market risk premium

Rio Tinto Zinc is planning to open a mine in Bolivia. The company estimates that the 
systematic risk of the project is 1.20, the risk-free rate of interest is 4 per cent and the 
market risk premium is 5 per cent. The country risk premium on Bolivian bonds is 
5.50 per cent. The local stock market has a volatility of 52 per cent and the volatility 
of Bolivian bonds is 35 per cent. What is the appropriate required return that Rio 
Tinto Zinc should use on cash flows from the project?

Apr 16 2021 View more View Less

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