PW Corporation has 10 million shares of common stock outstanding, 1 million shares of 6...
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PW Corporation has 10 million shares of common stock outstanding, 1 million shares of 6 percent preferred outstanding, and 100,000 8.5 percent semiannual coupon bonds outstanding, par value $1,000 each. The common stock currently sells for $40 per share and has a beta of 1.2, the preferred stock currently sells for $60 per share, and the bonds have 25 years to maturity and sell for 95 percent of par. The market risk premium is 7 percent, T-bills are yielding 4.5 percent, and the firm's tax rate is 21 percent. a. What is the firm's market value capital structure? 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?
(Please don't use Excel)
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