The Drake Company issues both debt and equity to fund its purchase of assets. It currently has a weighted cost of capital (WACC = Ra) at the rate of 9.20% The firm is in a 37.00% corporate tax bracket. One component of the WACC is debt and its before-tax cost is 4.95% The current debt to equity ratio (D/E) is 175.0% [a] Use the traditional WACC model (Ra) to determine the cost of equity (Re) for the firm. Ra = (E/V) * Re + (D/V) * Rd *(1 - Tc) Ra E/V Re D/V Rd (1 - Tc) Proof