AFP
CTP · Question #59
(Topic 1) A company is evaluating a project. What is the appropriate discount rate that it should use if its marginal tax rate is 34%, its capital structure is 40% common equity, and 60% debt. Its…
The correct answer is C. 5.58%. See the full explanation below for the reasoning.
Question
- (Topic 1)
A company is evaluating a project. What is the appropriate discount rate that it should use if its marginal tax rate is 34%, its capital structure is 40% common equity, and 60% debt. Its cost of equity is 10%, and its average cost of debt is 4%?
Options
- A5.04%
- B5.30%
- C5.58%
- D6.40%
How the community answered
(24 responses)- A13% (3)
- B8% (2)
- C75% (18)
- D4% (1)
Community Discussion
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