Occulators cost of capital is 12.7 percent. Its competitor, Enviroptics, has a cost of capital of 13.6 percent. Occulator is considering the acquisition of Enviroptics. Occulator would finance the acquisition with debt at an annual interest cost of 5.5 percent. The expected market rate of return is 9.2 percent and the risk-free rate is 2.1 percent. Which rate is most appropriate for Occulator to use as the discount rate when analyzing the acquisition of Enviroptics?

• 13.6%

• 2.1%

• 9.2%

• 12.7%

• 5.5%