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A firm is considering a project that is virtually risk-free. The company has a beta of 1.3 and a debt-equity ratio of.4
A firm is considering a project that is virtually risk-free. The company has a beta of 1.3 and a debt-equity ratio of.4. The appropriate discount rate to use in analyzing this project is: Multiple Choice
The cost of equity capital.
Zero.
The Treasury bill rate.
An adjusted WACC based on a beta of 1.0.
The firm's latest WACC.
Solutions
Expert Solution
The option (c) is right option.
Explanation:
Since the project is virtually risk free, Treasury bill rate should be used as discount rate to analyze the project as Treasury bill are risk free securities.
Hence, (c) is right option.
Hence, (c) is right option.
Hence, (c) is right option.
Hence, (c) is right option.
Hence (c) is right option.
Junaid answered 1 year agoRelated Solutions
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