Young Pharmaceuticals is considering a drug project that costs $3.8 million today and is expected to generate

Question:

Young Pharmaceuticals is considering a drug project that costs $3.8 million today and is expected to generate end-of-year annual cash flows of $267,000, forever. At what discount rate would Young be indifferent between accepting or rejecting the project?

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...