07 Problem 13-11 Project Discount Rate (LO2) 9.09 points The total market value of the equity of Okefenokee Condos is $12 million, and the total value of its debt is $8 million. The treasurer estimates that the beta of the stock currently is 1.4 and that the expected risk premium on the market is 10%. The Treasury bill rate is 5%, and investors believe that Okefenokee's debt is essentially free of default risk. eBook BOE a. What is the required rate of return on Okefenokee stock? (Do not round intermediate calculations. Enter your answer as a whole percent.) b. Estimate the WACC assuming a tax rate of 21%. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. Estimate the discount rate for an expansion of the company's present business. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) d. Suppose the company wants to diversify into the manufacture of rose-colored glasses. The beta of optical manufacturers with no debt outstanding is 16. What is the required rate of return on Okefenokee's new venture? (You should assume that the risky project will not enable the firm to issue any additional debt.) (Do not round intermediate calculations. Enter your answer as a whole percent.) Hint Print ole References % a. Required rate of return b. WACC % C. Discount rate % d. Required rate of return % 6 Problem 13-15 Capital Structure (LO3) 909 points in 2018. Caterpillar Inc. had about 656 million shares outstanding. Their book value was $31.0 per share, and the market price was $158.80 per share. The company's balance sheet shows that the company had $16.80 billion of long-term debt, which was currently selling near par value. eBook a. What was Caterpillaris book debt-to-value ratio? (Do not round intermediate calculations. Enter your answer as a decimal rounded to 2 decimal places.) b. What was its market debt-to-value ratio? (Do not round intermediate calculations. Enter your answer as a decimal rounded to 2 decimal places.) c. Which measure should you use to calculate the company's cost of capital? Hint Book debt-to-value ratio Print b. Markeet debt-to-value ratio C. Measure References