What discount rate should be assigned to the project

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Reference no: EM132759220

Problem 1: Silo Mills is an all-equity financed firm that has a beta of 1.14 and a cost of equity of 12.8 percent. The risk-free rate of return is 2.8 percent. The firm is currently considering a project that has a beta of 1.03 and a project life of six years. What discount rate should be assigned to this project?

A. 13.62 percent

B. 11.84 percent

C. 13.33 percent

D. 12.09 percent

Problem 2: Which of the following is true about a firm with no equity financing?

A. The after-tax cost of debt = WACC

B. The return on equity = WACC

C. The cost of debt = WACC

D. The return on equity = cost of debt

Reference no: EM132759220

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