What discount rate should be assigned to new project firm, Financial Management

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What discount rate should be assigned to new project firm

The Red Hen currently has a debt-to-equity ratio of .45, its cost of equity is 13.6 percent, and its beta is 1.49. The pretax cost of debt is 7.8 percent, the tax rate is 35 percent, and the risk-free rate is 3.1 percent. The firm’s target debt-to-equity ratio is .5. What discount rate should be assigned to a new project the firm is considering if the project is equally as risky as the overall firm and will be financed solely with debt?

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