Parrot is considering a new drone project that will allow search of hornet bees in the woods of the Pacific Northwest. The investment in technology would cost $25 million dollars and generate cash flows of $7.5 million over the next 4 years. The project's risk is higher than the risk of the company's average project. The company's current equity beta is 1.25 and its debt-to-equity ratio is 1/1. The YTM on company debt is 7% and the company's marginal tax rate is 25%. The risk-free rate is 2.5% and the market risk premium is estimated at 4.5%. To reflect the risk of this project, the company adjust the WACC upward by 2 percentage points. What is the discount rate Parrot should use for this project? Choose the best answer. For credit, show all work in your Excel spreadsheet.

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