Assume an all-equity company is considering expanding its current operations by increasing the size of its warehouse.The discount rate used for this project should be the

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The discount rate for the project should be the company's cost of equity capital, as the project will be financed solely with equity. The market rate of return may not reflect the company's specific risk and cannot be used as the discount rate. The discount rate used for a high-risk product line is not appropriate for a warehouse expansion. The lowest discount rate used over the past 2 years does not necessarily reflect the current risk of the project. The cost of debt is irrelevant for an all-equity company.

Assume an All-Equity Company Is Considering Expanding Its Current Operations