2. C. F. Lee Incorporated is considering a scale-enhancing project. The market value of the firm’s debt is $100 million, and the market value of the firm’s equity is $200 million. The debt is considered riskless. The corporate tax rate is 34 percent. Regression analysis indicates that the beta of the firm’s equity is 2.

The risk-free rate is 10 percent, and the expected market premium is 8.5 percent.

What would the project’s discount rate be in the hypothetical case that C. F. Lee, Inc., is all-equity?