ABC Corporation is a publicly traded company that specializes in aircraft parts production. The companys debt-to-equity ratio is 1/7 and it plans to maintain the same debt-to-equity ratio indefinitely. ABC firms debt is riskless, and its equity beta is 1.8. The risk-free rate is 5%, and the market risk premium is also 5%. The corporate tax rate for ABC firm is 30%.

Suppose that ABC is trying to decide whether to start producing solar panels. It plans to finance this new projects with 40% of debt and 60% of equity.The cost of the debt for the new project is 6%. There are two publicly traded electric solar panels manufacturers in the market: Auxin and First Solar. Auxins debt-to-equity ratio is 1/2. Its debt beta is 0.3, and its equity beta is 1.4. First Solars debt-to-equity ratio is 1/3. Its debt beta is 0.1, and its equity beta is 1.7. What discount rate should ABC use to discount the cash flows from its solar panel project?

a. What is the industry asset beta based on Auxin and First Solar?

The industry asset beta

enter your response here.

(Round to two decimal places.)

b. What discount rate should ABC use to discount the cash flows from its solar panel project?

The WACC for ABC's solar panel project is estimated to be

enter your response here%.

(Round to two decimal places.)