Bluefield is evaluating a new investment project

Reference no: EM1314901

Q. Finding the WACC Bluefield Corporation has 5 million shares of common stock outstanding, 750,000 shares of 7 percent preferred common stock outstanding also 250,000 11 percent semiannual bonds outstanding, par value 1,000 each. The stock currently sells for $40 per share also has a beta of 1.2, the preferred stock currently sells for $75 per share also the bonds have a 15 yrs to maturity also sell for 93.5 percent of par. The market risk premium is 6 percent, T-bills are yielding 4 percent also Bluefield's tax rate is 34 percent.

a. Illustrate what is the firm's market value capital structure?

b. If Bluefield is evaluating a new investment project which has the same risk as the firm's typical project, illustrate what rate should it utilize to discount the project's cash flows?

Reference no: EM1314901

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