Reference no: EM131125720
Organic Produce Corporation has 7.9 million shares of common stock outstanding, 540,000 shares of 7.4 percent preferred stock outstanding, and 179,000 of 8.6 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $64.40 per share and has a beta of 1.24, the preferred stock currently sells for $107.60 per share, and the bonds have 13 years to maturity and sell for 94 percent of par. The market risk premium is 7 percent, T-bills are yielding 5.7 percent, and the firm’s tax rate is 35 percent.
Required: (a) What is the firm's market value capital structure?
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?
Weighted average cost of capital %
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: Organic Produce Corporation has 7.9 million shares of common stock outstanding, 540,000 shares of 7.4 percent preferred stock outstanding, and 179,000 of 8.6 percent semiannual bonds outstanding, par value $1,000 each. What is the firm's market value..
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