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Organic Produce Corporation has 8.7 million shares of common stock outstanding, 620,000 shares of 7.2 percent preferred stock outstanding, and 187,000 of 8.4 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $65.20 per share and has a beta of 1.32, the preferred stock currently sells for $106.80 per share, and the bonds have 17 years to maturity and sell for 90 percent of par. The market risk premium is 6.9 percent, T-bills are yielding 5.6 percent, and the firm's tax rate is 38 percent.
Required:
(a)What is the firm's market value capital structure? (Do not round intermediate calculations. Round your answers to 4 decimal places.
Market value weight of debt? Market value weight of preferred stock? 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? (Do not round intermediate calculations.
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