Question: Question 6 (2 points): The Drake Co. has both equity and debt trading in the markets. The market value of the equity is $ 50

Question 6 (2 points): The Drake Co. has both equity and

Question 6 (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 3.5% and the market risk premium is 6%. There are no taxes. The Drake Co. is considering expanding its business. Dennis is an equity investor considering an investment in the Drake Co.. What rate of return does Dennis expect on his investment? a. 3.00% b. 9.00% c. 9.75% d. 11.00% e. None of the above

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