What is the appropriate leverage discount rate to purpless

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Mondo Cult is considering acquiring pulplesscom. Pulpless is currently ?nanced with 0.2% debt at an interest rate of {rd}%. If the acquisition takes place the debt level will continue at the 0.2% target level and the interest rate will remain the same. Pulpless's pre-merger beta is 1.7, and its tax rate is 0.4%. The risk-free rate is 0.03% and the market risk premium is 0.02%.

Problem 1: What is the appropriate leverage discount rate to purpless .com?

Reference no: EM132950602

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