15. (rE, and WACC) The current risk- free rate is rf = 4%, and the expected rate of return on the market portfolio is E rM ( ) = 10%. The Brandywine Corporation has two divisions of equal market value. The debt-to-equity ratio of the company is 3/ 7, and the company’s bonds are risk- free. For the last few years, the Brandy division has been using a discount rate of 12% in capital budgeting decisions, and the Wine division a discount rate of 10%. You have been asked by their managers to report on whether these discount rates are properly adjusted for the risk of the projects in the two divisions. The tax rate is 35%.