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What discount rate should be assigned to new project

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APL has an overall cost of capital of 11.6 percent and a beta of 1.31. The firm is contemplating a new project that is unrelated to the firm's current operations. SKL is a firm that operates similarly to the new project and SKL has a cost of capital of 10.7 percent. APL knows that it will be less efficient than SKL and thus feels that an adjustment of +1 percent should be added to the project's discount rate to allow for this inefficiency. What discount rate should be assigned to the new project?

Reference no: EM133068552

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