Organic Produce Corporation has 6.3 million shares of common stock outstanding, 350,000 shares of 5.8 preferred...

Organic Produce Corporation has 6.3 million shares of common stock outstanding, 350,000 shares of 5.8 preferred stock outstanding, and 150,000 of 7.1 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $74 per share and has a beta of 1.09, the preferred stock currently sells for $107 per share, and the bonds have 20 years to maturity and sell for 109 percent of par. The market risk premium is 6.8 percent, T-bills are yielding 4.3 percent, and the firm’s tax rate is 34 percent.

Required:
(a)	What is the firm's market value capital structure? (Do not round intermediate calculations. Round your answers to 4 decimal places (e.g., 32.1616).)

Market value weight of debt
Market value weight of preferred stock
Market value weight of equity

(b)

If the firm is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should the firm use to discount the project’s cash flows? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

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jeff jeffy answered 1 year ago

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