ART manufactures traditional scooters. It has an equity beta of 1.4 and is financed entirely by equity. It plans to continue to be all-equity financed in future.
It is considering producing a range of electric scooters
GGG is a comparable quoted electric scooter manufacturer GGG has an equity beta of 2 4 reflecting its high level of gearing (the ratio of debt to equity is VI using market values).
The risk-free rate is 5%, and the market premium is 6%. The rate of corporation tax is 20%
What is the recommended discount rate that ART should use to assess the project to manufacture electric scooters?
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