1. Caterpillar, Inc. (CAT) has a market capitalization of $60 billion, enterprise value of $85 billion, equity beta of 2.00, and a debt rating of B. CAT's tax rate is 25%. The yield to maturity of the 10-year Treasury Note is 2.1%. The market risk premium is 8%. The loss rate on corporate debt is 50%. See the tables below for additional information on corporate debt.

Debt Betas by Rating
Rating	A and above	BBB	BB	B	CCC
Avg Beta	0.05	0.10	0.15	0.25	0.35
Default Rates by Rating
Rating	AAA	AA	A	BBB	BB	B	CCC	CC-C
Average	0.0%	0.0%	0.2%	0.4%	2.1%	5.2%	9.9%	12.9%
In Recession	0.0%	1.0%	3.0%	3.0%	8.0%	16.0%	43.0%	79.0%

a) What should be the yield to maturity of CATs debt during recession?

b) What are CAT's unlevered cost of capital and after-tax WACC during recession?