Question
**Please NO Excel** WWE is a conglomerate planning to entering the widget business, where it plans to finance projects with a 25% debt. There is
**Please NO Excel**
WWE is a conglomerate planning to entering the widget business, where it plans to finance projects with a 25% debt. There is only one firm in the widget industry-AW. AW has 40% debt, an equity beta of 1.5, cost of debt of 12.
WWE expects to borrow for its widget venture at 10%.
Tax rate is 40%,market risk premium is 8.5%, risk free rate is 8%.
What is the appropriate discount rate for WWE to use for its widget venture?
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Financial Markets And Institutions
Authors: Anthony Saunders, Marcia Cornett
4th Edition
0077262379, 978-0077262372
