Quizner, Inc. a small manufacturing business (<$1million revenues) just finished their 3rd year of business. Right now the yield on the 20yr, T-bond rate is 2.00%, and the equity premium is 5%. Quizner, Inc. has a weak competitive position compared to its competitors (Firm specific characteristics), so need to adjust the discount rate by 4% to reflect this. What is the appropriate discount rate for a present value analysis of Quizner, Inc.'s pro-forma?
Quizner, Inc. a small manufacturing business (<$1million revenues) just finished their 3rd year of business. Right now the yield on the 20yr, T-bond rate is 2.00%, and the equity premium is 5%. Quizner, Inc. has a weak competitive position compared to its competitors (Firm specific characteristics), so need to adjust the discount rate by 4% to reflect this. What is the appropriate discount rate for a present value analysis of Quizner, Inc.'s pro-forma?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Quizner, Inc. a small manufacturing business (<$1million revenues) just finished their 3rd year of
business. Right now the yield on the 20yr, T-bond rate is 2.00%, and the equity premium is 5%.
Quizner, Inc. has a weak competitive position compared to its competitors (Firm specific
characteristics), so need to adjust the discount rate by 4% to reflect this. What is the appropriate
discount rate for a present value analysis of Quizner, Inc.'s pro-forma?
O 39%
O 19%
35%
O 31%
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