Evaluate a new project with same systematic risk

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Hurricane Corporation is financed with debt, preferred equity, and common equity with market values of $20 million, $10 million, and $30 million, respectively.

The betas for the debt, preferred stock, and common stock are 0.2, 0.5, and 1.1, respectively.

If the risk free rate is 3.95 percent, the market risk premium is 6.01 percent, and Hurricane's average and marginal tax rates are both 30 percent, what discount rate should Hurricane Corp. use to evaluate a new project with same systematic risk as the firm?

Reference no: EM131913141

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