The total market value of the common stock of the Okefenokee Real Estate Company is $12.5 million, and the total value of its debt is $7.9 million. The treasurer estimates that the beta of the stock is currently 1.6 and that the expected risk premium on the market is 7%. The Treasury bill rate is 5%. 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.)