If a firm can borrow at 9 percent, what discount rate should the firm use to discount lease cash flows? (The marginal tax rate for the firm is 21 percent.)

Name: If a firm can borrow at 9 percent, what discount rate should the firm use to discount lease cash flows? (The marginal tax rate for the firm is 21 percent.)
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Question

Quizplus · Accepted Answer

The firm's after-tax cost of borrowing is 9%*(1-21%)=7.11%. Therefore, the discount rate should be 7.11%.

If a Firm Can Borrow at 9 Percent, What Discount