What rate should the firm use to discut projects cash flow

Reference no: EM13296490

Organic Produce Corporation has 7;5 millions shares of common stock outstanding, 500,000 shares of 7 percent preferred stock outstanding, and 175,000 of 82 percent of ski annual bonds outstanding, par value $1000 each. The common stock currently sells for $64 per share and has a beta of 1.2, the prefer stock currently sells for $108 per share, and the bonds have 15 years 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. What is the firm's market value capital structure? If he 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 discut the projects cash flow?

Reference no: EM13296490

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