Suppose that you are the CFO of ABC Inc., which is an all-equity firm whose beta is 0.5. You are considering a new project that is in the same line of business as ABC Inc.’s existing projects. Assume that the CAPM holds. The risk-free rate is 2% and the market risk premium 6%. What is the discount rate for this new project?

Anew firm is developing its business plan. it will require $615,000 of assets, and it projects $450,000 of sales and $355,000 of operating costs for the first year. management is reasonably sure of these numbers because of contracts with its customers and suppliers. it can borrow at a rate of 7.5%, but the bank requires it to have a tie of at least 4.0, and if the tie falls below this level the bank will call in the loan and the firm will go bankrupt. what is the maximum debt ratio the firm can use? (hint: find the maximum dollars of interest, then the debt that produces that interest, and then the related debt ratio.)a. 41.94%b. 44.15%c. 46.47%d. 48.92%e. 51.49%