Martin Technologies Inc., a large electronics company, is evaluating the possible acquisition of Columbia Electronics, a regional electronics company. Martin$$s analysts project the following post$-$merger data for Columbia $($in millions of dollars$)$:

$2018201920202021$

Net sales $$300$ $$425$ $$475$ $$550$

Selling and administrative expense $40506075$

Interest $25303540$

Tax rate after merger $35\%$

Cost of goods sold as a percent of sales $75\%$

Beta after merger $1\mathrm{.}21$

Risk$-$free rate $5\%$

Market risk premium $7\%$

Continuing growth rate of cash flow available to Martin $5\%$

If the acquisition is made, it will occur on January $1,2018.$ All cash flows shown in the income statements are assumed to occur at the end of the year. Columbia currently has a capital structure of $40\%$ debt, but Martin would increase that to $50\%$ if the acquisition were made. Columbia, if independent, would pay taxes at $20\%$; but its income would be taxed at $35\%$ if it were consolidated. Columbia$$s current market$-$determined beta is $1\mathrm{.}15,$ and its investment bankers think that its beta would rise to $1\mathrm{.}21$ if the debt ratio were increased to $50\%.$ The cost of goods sold is expected to be $75\%$ of sales, but it could vary somewhat. Depreciation$-$generated funds would be used to replace worn$-$out equipment, so they would not be available to Martin$$s shareholders. The risk$-$free rate is $5\%,$ and the market risk premium is $7\%.$

What is the appropriate discount rate for valuing the acquisition? Do not round intermediate calculations. Round your answer to two decimal places.

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