Question: Caballos, Inc., has a debt to capital ratio of 23%, a beta of 0.58 and a pre-tax cost of debt of 7.4%. The firm had earnings before interest and taxes of $ 579 million for the last fiscal year, after depreciation charges of $ 228 million. The firm had capital expenditures of $ 300 million, and non-cash working capital increased by $ 56 million. The firm also had a book value of capital of $ 1.9 billion at the beginning of the last fiscal year. (The treasury bond rate is 4.6 %, the market risk premium is 5.6 % and the firm has a tax rate of 40 %). Assume that the firm is in stable growth, and that the return on capital and reinvestment rates for the last fiscal year can be sustained forever. Estimate the Reinvestment Rate.