What is the firm market value weight of debt

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Hankins Corporation has 8.1 million shares of common stock outstanding, 560,000 shares of 7.1 percent preferred stock outstanding, and 181,000 of 8.3 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $64.60 per share and has a beta of 1.26, the preferred stock currently sells for $107.40 per share, and the bonds have 16 years to maturity and sell for 93 percent of par. The market risk premium is 6.85 percent, T-bills are yielding 5.55 percent, and the firm's tax rate is 30 percent.

a) What is the firm's market value weight of debt, market value weight of preferred stock and market value weight of equity?

b)  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?

Reference no: EM132004298

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