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What is appropriate leveraged discount rate

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Question - Mondo Cult is considering acquiring pulpless. Pulpless is currently financed with 0.5% debt at an interest rate of {rd}%. If the acquisition takes place the debt level will continue at the 0.5% target level and the interest rate will remain the same. Pulpless's pre-merger beta is 2.0, and its tax rate is 0.3%. The risk-free rate is 0.04% and the market risk premium is 0.02%. What is the appropriate leveraged discount rate to value pulpless?

Reference no: EM132446468

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