In: Finance
Hankins Corporation has 6.8 million shares of common stock
outstanding, 328,000 shares of 4.85 percent preferred stock
outstanding, par value of $100, and 81,000 5.2 percent semiannual
bonds outstanding, par value $2,000 each. The common stock
currently sells for $74.85 per share and has a beta of 1.10, the
preferred stock currently sells for $102.40 per share, and the
bonds have 21 years to maturity and sell for 96.9 percent of par.
The market risk premium is 7.2 percent, T-bills are yielding 3.2
percent, and the firm’s tax rate is 24 percent.
What is the firm's market value capital structure? (Do not round
intermediate calculations and round your answers to 4 decimal
places, e.g., .1616.)
What is the firm's cost of each form of financing? (Do not round
intermediate calculations and enter your answers as a percent
rounded to 2 decimal places, e.g., 32.16.)
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 and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)