Question
The total market value of the equity of Okefenokee Condos is $6 million, and the total value of its debt is $4 million. The treasurer
The total market value of the equity of Okefenokee Condos is $6 million, and the total value of its debt is $4 million. The treasurer estimates that the beta of the stock currently is 1.0 and that the expected risk premium on the market is 12%. The Treasury bill rate is 4%, and investors believe that Okefenokee's debt is essentially free of default risk.
b. Estimate the WACC assuming a tax rate of 21%. (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 companys present business. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
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