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 1.2 and that the expected risk premium on the market is 5%. The Treasury bill rate is 3%, and investors believe that Okefenokee's debt is essentially free of default risk.

a) What is the required rate of return on Okefenokee stock?

b) Estimate the WACC assuming a tax rate of 21%.

c) Estimate the discount rate for an expansion of the companys present business.

d) Suppose the company wants to diversify into the manufacture of rose-colored glasses. The beta of optical manufacturers with no debt outstanding is 1.4. What is the required rate of return on Okefenokees new venture? (You should assume that the risky project will not enable the firm to issue any additional debt.)