Lebron Inc. plans to invest in seaweed farms. A CFO of Lebron Inc. reports that the initial outlay of this investment opportunity is $10,000,000 and that the company can raise funds externally. To be specific, the firm can borrow $5,000,000 by issuing bonds at 5%, and the remaining $5,000,000 can be funded by issuing shares. The expected return on the common stocks is 15%. In addition, the opportunity cost of capital is 17%. What is the appropriate discount rate to use for this investment valuation?

Answer rating: 100% (QA)

Given information External Borrowing 5000000 at 5 interest ra... View the full answer