What is the appropriate discount rate to use

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Question - Boutique A is a boutique investment firm that is completing an analysis on Construction Inc., a small publicly traded construction equipment company that one of their clients is contemplating as an acquisition. Construction, Inc. does not have any publicly traded debt, nor do they have recent observable borrowings. Boutique A collects firm fundamentals and other information from Construction, Inc.'s financial statement and from the market. The information is the following:

Book Value of Equity $235M

Market Value of Equity $267M

Book Value of Total Debt $101M

Current Year Interest Expense $9.7M

Cost of Equity Capital 8.00%

Cost of Debt 9.25%

Marginal Tax Rate 30%

Required - Using only the information above, what is the appropriate discount rate to use if Boutique A chooses to value the enterprise using a discounted future benefits model?

Reference no: EM133140709

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