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Consider a firm that needs $10M for a risk-free project. It can borrow the whole amount ($10M) at 7%. The risk-free rate is 5%. The
Consider a firm that needs $10M for a risk-free project. It can borrow the whole amount ($10M) at 7%. The risk-free rate is 5%. The firm s cost of equity is 12% and its WACC is 10%. The tax rate is 0. What s the appropriate discount rate for the project "s" cash flows?
A.
7%
B.
5%
C.
12%
D.
insuffiecient information
E.
10%
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