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Homework answers / question archive / Delta Foods is an unlevered firm that is equally as risky as the market
Delta Foods is an unlevered firm that is equally as risky as the market. U.S. Treasury bills are yielding 2.4 percent, and the market rate of return is 8.1 percent. What discount rate should be assigned to a project that has the same risks as Delta Foods?
Computation of Discount Rate:
Discount Rate = 2.4%+1*(8.1%-2.4%)
= 2.4% + 5.70%
Discount Rate = 8.1%
So, Discount Rate is 8.1% Please see the answer attached below.
