Question: Question 5 (2 points): The Drake Co. has both equity and debt trading in the markets. The market value of the equity is $ 50

Question 5 (2 points): The Drake Co. has both equity and

Question 5 (2 points): The Drake Co. has both equity and debt trading in the markets. The market value of the equity is $ 50 million and the market value of debt is $ 6 million. The debt is risk free and the equity has a beta of 1.4. The risk free rate is 2.75% and the market risk premium is 5%. There are no taxes. The Drake Co. is considering expanding its business. What is the discount rate used to discount the incremental cash flows of the expansion project? a. 3.00% b. 9.00% c. 9.75% d. 11.00% e. None of the above

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