Delta Foods is an unlevered firm that is equally as risky as the market

Finance Jan 26, 2021

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?

Expert Solution

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.

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