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Gamma Biosciences is financed entirely with equity. Its beta is 1.5,
and its price-earnings ratio is 16. The current risk-free rate is 8
percent, and the expected return on the market is 14 percent.
a. what rate of return should the company require on projects of average risk?
b. if a new project has a beta of 2.0 what rate of return should the company require?
