(11 marks) Question 2: Ontaronto Co. is looking at setting up a manufacturing plant to produce a new line of tire. This will be a four-year project. The following market data on Ontaronto's securities are current: . . Common stock: 6,300,000 shares outstanding, selling for $64 per share; the beta is 1.5 Market: 6% expected market risk premium; 3% risk-free rate Debt: All bonds are semi-annual bonds. . Price Bond Coupon Rate Quote 6.50 % 103.18 2. 7.00 % 110.5 Maturity Face Value 8 years $ 35,000,000 45,000,000 50,000,000 25 years 75,000,000 8 years 3 7.50 % 109.85 15.5 years 6.70 % 102.75 Ontaronto's tax rate is 35%. Assume Ontaronto raises all the money required for the new project externally. a) (9 marks) What would be the required return on the project if it had the same level of risk as a typical investment of the company? b) (2 marks) The new tire project is somewhat riskier than a typical project for Ontaronto, primarily because the plant is being located overseas. Management has told you to use an adjustment factor of 8% to account for this increased riskiness. Calculate the appropriate discount rate to use when evaluating Ontaronto's project