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What would be a better discount rate for this investment

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Question - Binomial Tree Farm's financing includes $7.00 million of bank loans and $8.00 million book (face) value of 10-year bonds, which are selling at 90% of par value. Its common equity is shown in Binomial's Annual Report at $8.67. It has 700,000 shares of common stock outstanding which trade on the Wichita Stock Exchange at $36 per share. What debt ratio should Binomial use to calculate its WACC? What is the Market debt ratio?

Geothermal's WACC is 10.4%. Executive Fruit's WACC is 11.3%. Now Executive Fruit is considering an investment in geothermal power production. a. Should it discount project cash flows at 11.3%? b. What would be a better discount rate for this investment?

Reference no: EM133024025

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