The common stock of Buildwell Conservation \& Construction Incorporated (BCCl) has a beta of 0.9 . The Treasury bill rate is 4%, and the market risk premlum is estimated at 8%. BCCl's capital structure is 22% debt, paying an interest rate of 5%, and 78% equity. The debt sells at par: Bulliwell pays tax at 21%. a. What is BCCl's cost of equity capital? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. b. What is its WACC? Note: Do not round intermediate calculations, Enter your answer as a percent rounded to 2 decimal places. c. If BCCl is presented with a normal project with an internal rate of return of 12%, should it accept the project if it has the same level of risk as the current firm? The total market value of the equity of Okefenokee Condos is $8 million, and the total value of its debt is $2 million. The treasurer estimates that the beta of the stock currently is 0.6 and that the expected risk premium on the market is 10%. The Treasury bill rate is 5%, and irvestors believe that Okefenokee's debt is essentially free of defauit risk. a. What is the required rate of return on Okefenokee stock? Note: Do not round intermediate calculations. Enter your answer as a whole percent. b. Estimate the WACC assuming a tax rate of 21%. Note: 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. Note: 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 .8. 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.) Note; Do not round intermediate calculations. Enter your answer as a whole percent. The common stock of Buildwell Conservation \& Construction Incorporated (BCCl) has a beta of 0.9 . The Treasury bill rate is 4%, and the market risk premlum is estimated at 8%. BCCl's capital structure is 22% debt, paying an interest rate of 5%, and 78% equity. The debt sells at par: Bulliwell pays tax at 21%. a. What is BCCl's cost of equity capital? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. b. What is its WACC? Note: Do not round intermediate calculations, Enter your answer as a percent rounded to 2 decimal places. c. If BCCl is presented with a normal project with an internal rate of return of 12%, should it accept the project if it has the same level of risk as the current firm? The total market value of the equity of Okefenokee Condos is $8 million, and the total value of its debt is $2 million. The treasurer estimates that the beta of the stock currently is 0.6 and that the expected risk premium on the market is 10%. The Treasury bill rate is 5%, and irvestors believe that Okefenokee's debt is essentially free of defauit risk. a. What is the required rate of return on Okefenokee stock? Note: Do not round intermediate calculations. Enter your answer as a whole percent. b. Estimate the WACC assuming a tax rate of 21%. Note: 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. Note: 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 .8. 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.) Note; Do not round intermediate calculations. Enter your answer as a whole percent
