A firm currently has debt outstanding with a coupon rate of 7 percent. The firm is...
A firm currently has debt outstanding with a coupon rate of 7 percent. The firm is obtaining subsidized financing for a new project at a rate of 5.5 percent. The current market rate is 6.8 percent and the firm's tax rate is 21 percent. What discount rate should be used to compute the NPV of the loan?
Homework Answers
The current market rate is the best rate to be used for discount
rate .The subsidized rate should not be used.
Hence 6.8% is the correct discount rate.
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