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Bluefield Corporation has 4 million shares of Common Stock,

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Problem 1--WACC: Bluefield Corporation has 4 million shares of Common Stock, 750,000;shares of $100 par, 7% percent preferred stock, and 200,000 11 percent bonds, (Par Value 1,000;semi-annual interest) outstanding. The Common Stock currently sells for $38 per share and has a;Beta () of 1.05. The Preferred Stock currently sells for $80 per share, and the bonds have 15;years to maturity and sell for 91.5 percent of $1000 par. The market risk premium is 6 percent, Tbills are yielding 1.7 percent, and Bluefields aggregate tax rate is 40 percent.;a. What is the firms market value capital structure?;b. If Bluefield is evaluating a new investment project that has the same risk as the firm;as a whole, what rate should it use to discount the projects cash flows?

 

Paper#24670 | Written in 18-Jul-2015

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