1. Pop SA (14 points) Pop SA is a beverage & snacks conglomerate whose products include popular sodas and juices as well as chips and other snack foods. Pop SA is considering a $100 million investment in a new line of Pro Chips targeted at athletes. To determine the relevant discount rate at which to discount the cash flows for the new line of chips, Pop SA has researched several other corporations, including Ness SA (a direct competitor selling both beverages and snacks) and Lacy Corp., which sells only snack foods. Pop SA and other corporations maintain a fixed leverage ratio. Debt Valuest Equity Valuest Betas Book Market Book Market Equity Debt 225 175 100 400 410 270 450 450 300 1.2 0.2 1.3 0.2 1.7 0.3 200 Pop SA Ness SA Lacy Corp t Historical average over period for which betas are estimated. 160 90 Pop SA intends to maintain a fixed debt-to-equity ratio of 0.5 after launching the new chip line. The risk-free rate is r 2%. Pop SA believes it will face a borrowing rate of o-5% for the new project. All firms face a corporate tax rate of tc-2196. The market risk premium is rm-r-6%