Your company currently manufactuers auto parts and has a weighted average cost of capital of 10%. You are considering entering a new business of manufacturing medical devices like ventilators. Since this is new to your, you perceive the risk to be higher. When evaluating the new ventilator manufacturing project, the new project cash flows should be discounted using:

Multiple Choice

• a project discount rate that is less than 10%.

• a rate commensurate with the risk level of the project, which would be greater than 10%.

• the market rate of return.

• the 10% weighted average cost of capital.

• a rate based on the company's current beta.