A company is considering a new investment. The investment’s cost is expected to be $72 million and will return $13.5 million for 5 years in net cash flows. The ratio of debt to equity is 1 to 1. The cost of equity is 13%, the cost of debt is 9%, and the tax rate is 34%. Assuming average risk, what’s the appropriate discount rate?

Answer rating: 100% (QA)

To find the appropriate discount rate you need to calculate the weighted average cost of capital ... View the full answer