What discount rate is appropriate for finding the value of Artforever.com? Write a few paragraphs giving your answer and clearly explaining your reasoning and computations; show detailed computations in your Excel spreadsheet labeled Exhibit 1.

Cost of Debt = 6.2%

After tax rate - CoD = 6.2%*(1-tax rate) = 6.2% * (1-40%) = 3.72%

Considering the Market return, R_m = 8%

Risk-free rate, R_f = 2.5% (30 yr Treasury bond YTM)

Considering industry beta = 1.5

Cost of equity = R_f + beta*(R_m - R_f) = 8% + 1.5*(8% - 2.5%) = 10.75%

Artforever's debt-to-value ratio = 15%.

Hence Equity value would be 85% of V as D+E=V.

WACC/Discounting rate to be used would be = (D/E)*CoD + (E/V)*CoE

= 9.6955% = 9.7%

Can you explain the computations and how we reached this answer?