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Use the information provided in the table below to calculate the expected return on each firm’s



1. Explain the terms ‘market value of debt’ and ‘market value of equity’

2. What does the term ‘pure play’ mean according to Narayanan et al? What would be an appropriate pure play for Google if they had plans to launch a pay TV channel?

3. How do the ‘cost of debt’ and ‘cost of equity’ affect the considerations regarding investment proposals?