1) The total market value of the common stock of the Okefenokee Real Estate Company is $8.5 million, and the total value of its debt is $6.3 million. The treasurer estimates that the beta of the stock is currently 1.4 and that the expected risk premium on the market is 7%. The Treasury bill rate is 3%. Assume for simplicity that Okefenokee debt is risk-free and the company does not pay tax.

1. What is the required return on Okefenokee stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
2. Estimate the company cost of capital. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
3. What is 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.)
4. Suppose the company wants to diversify into the manufacture of rose-colored spectacles. The beta of unleveraged optical manufacturers is 0.90. Estimate the required return on Okefenokee's new venture. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

2) A company is 34% financed by risk-free debt. The interest rate is 10%, the expected market risk premium is 8%, and the beta of the companys common stock is 0.65. What is the after-tax WACC, assuming that the company pays tax at a 30% rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)