Solution-Discount the project cash flows

Discount the project cash flows

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Reference no: EM132596080

Raymond Reddington Corp. has 8.5 million common shares outstanding, 250,000 shares of 5% preferred stock outstanding and 135,000 7.5% semi-annual bonds outstanding, per value of $1000 each. The common stock sells for $34 and has beta of 1.25. The preferred stock currently sells for $91 per share. The bonds have 15 years to maturity and sell for 114% of par. The market risk premium is 7.5%, T-bills are yielding 4% and the company's tax rate is 35%.

Raymond Reddington Corp. 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?

Reference no: EM132596080

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Discount the project cash flows

Reference no: EM132596080

Reference no: EM132596080

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