What discount rate should peter pet foods use

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Question - Peter's Pet Foods has a WACC of 12.5 percent and is considering manufacturing pet toys. Tim's Toys specializes in pet toys and has a WACC of 10.5 percent. What discount rate should Peter's Pet Foods use to evaluate this investment?

a) 10.5 percent because that is appropriate given the risk of the project

b) 12.5 percent because that is the appropriate rate for the company

c) 11.5 percent because after investment Peter's will be a combination of the two businesses

d) A weighted average of 12.5 and 10.5 with the weights based on the proportion in each business

e) The risk-free rate.

Reference no: EM133027769

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