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Finding the WACC. Organic Produce Corporation has...

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Question

Finding the WACC. Organic Produce Corporation has 7.5 million shares of common stock outstanding, 500,000 shares of 7 percent preferred stock outstanding, and 175,000 of 8.2 percent semiannual bonds outstanding, par value $1000 each. The common stock currently sells for $64 per share and has a beta of 1.2, the preferred stock currently sells for $108 per share, and the bonds have 15 yrs to maturity and sell for 96 percent of par. The market risk premium is 6.8 percent, T-bills are yielding 5.5 percent, and the firm?s tax rate is 34 percent. a. What is the firm?s market value capital structure? b. If the firm is evaluation 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?

 

Paper#8824 | Written in 18-Jul-2015

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