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Your company has many divisions, such as AI, online gaming, software, and manufacturing computers. The...

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Finance

Your company has many divisions, such as AI, online gaming, software, and manufacturing computers. The WACC of your firm is estimated to be 12%. You are evaluating a project in the AI division, and you feel that Vocal Inc. is a comparable publicly traded company for your AI division. Vocal Inc. has a beta of 1.5 and its debt is 20% of its capital structure. The pretax cost of debt is 7%. Its tax rate is 35%. What is the appropriate discount rate to evaluate this project in the AI division? Assume a risk free rate of 1% and a market risk premium of 7%.

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