Problem 2 (25 marks): Atlantic Groceries is a supermarket chain located in Nova Scotia. Atlantic Groceries is considering expanding into a new line of business by opening coffee shops in their grocery stores. Currently, Atlantic Groceries has a before tax cost of debt of 6%, and an effective tax rate of 40%. Its stock has a beta of 2.5, and the firm's debt to equity ratio is equal to 1 . The firm has identified a pure play company (Tim Hortons) whose only business is operating coffee shops. Tim Hortons has a before tax cost of debt of 4%, its beta is 1.5, and it has a debt to equity ratio of 0.50. The effective tax rate of Tim Hortons is 30\%. The expected return on the market is 8%, and the risk free rate of interest is 4%. a) Determine the appropriate discount rate (WACC) Atlantic Groceries should use for evaluating new projects within its business of grocery stores. (9 marks)