Question
The Aardvark Corporation is considering launching a new product and is trying to determine an appropriatediscount rate for evaluating this new product. Aardvark has identified
The Aardvark Corporation is considering launching a new product and is trying to determine an appropriatediscount rate for evaluating this new product. Aardvark has identified the three single division firms that offer products similar to the one Aardvark is interested in launching. One of the three firms, Anteater Enterprises has an equity cost of capital of 12.5%, a debt cost of capital of 6.5%, and a debt-to-value ratio of 50%. The unlevered cost of capital for Anteater Enterprises is closest to __________.
Options: A)10.1% B)9.9% C)9.5% D)10.3%
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