Considering new project outside of current line of business

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Reference no: EM131064826

Texas Utensils is considering a new project outside of its current line of business. The project would cost $500,000 initially and would generate revenue of $60,000 next year which would grow at 4% per year indefinitely. Since the project is outside the current line of business, managers at Texas Utensils are finding it difficult to agree on the appropriate risk-adjusted discount rate to use in valuing the project. What is the highest discount rate that could be used for the project before it would appear unprofitable?

Please use the formula, do not just show me the answer with excel or calculator.

Reference no: EM131064826

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