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What rate should rrrs use to discount the cash flows

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Question - Red's Radical Rhinitis Solutions (RRRS), an pharmaceutical manufacturer wants to know what rate it should use to discount the cash flows generated by its assets. You have calculated RRRS' beta of assets as 2.8. You looked at long term historical data for the stock market and found the historical return on the market was 13.1%. Over the same time period, the return on long term government bonds was 4.3%. Long term bonds are currently returning 3.9%. What rate should RRRS use to discount the cash flows of the assets?

Reference no: EM132030061

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