Question
a chemical firm is cinsidering to open a new food processing plant.this firm is financed by common stock only.the financing from this project comes from
a chemical firm is cinsidering to open a new food processing plant.this firm is financed by common stock only.the financing from this project comes from internally.after this diversifying investment,this firm is expected to have 25% of its asset in food processing industry and the other 75% in chemical industry.the most recent risk free rate is 1% the long term average market risk premium is 6%. the food processing industry has unlevered equity beta of 0.8,the chemical industry has an unlevered equity beta of 1.1.what should be the proper discount rate to evaluate this project? what should be the firms cost of capital?
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