Question: Should we use the recommended 4% discount rate?

B-Well Health Mart has a capital structure consisting of 30% debt and 70% equity. The debt consists of loans from the Long Island Bank with an interest rate of 7.2%. The cost of equity of the shareholders is 15%. The corporate tax rate is 35%. The financial management team suggests that you use a discount rate of 4% on the projects since that is the average interest rate we earn on the CDs with Long Island Bank. 2