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Panorama Corporation intends to invest in a new project. The investment cost is expected to be $25.4 million and will return $8.75 million for 5
Panorama Corporation intends to invest in a new project. The investment cost is expected to be $25.4 million and will return $8.75 million for 5 years in net cash flows. The ratio of debt to equity (D/E) is 1.40. The cost of equity is 15.3%, the pretax cost of debt is 7.5%, and the tax rate is 25%. What is the appropriate discount rate? (Hint: Use the D/E ratio to calculate the weights of debt and equity)
9.45% | ||
9.66% | ||
9.88% | ||
10.05% | ||
10.27% |
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