### The weight of debt in the firms capital structure

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As a consultant to GBH skiwear, you have been ask to compute the appropriate discount rate to use to evaluate the purchase of a new warehouse facility. You have determined the market value of the firm's capital structure as follows: Source of Caital Market Value Bonds \$470,000 Preferred Stock \$140,000 Common Stock \$410,000 To finance the pruchase, GBH will sell 20 year bonds, with a \$1000 par value paying 7.% per year (paid semi annually), at the market price of \$944. Preferred stock paying a \$2.54 dividend can be sold for \$34.45. Common stock for GBH is currently selling for \$50.92 per share. The firm paid a \$4.02 dividend last year and expects dividends to continue growing at a rate of 4.1%per year into the indefinite future. The firm's marginal tax rate is 34%. What discount rate should you use to evaluate the warehouse project?

The weight of debt in the firm’s capital structure is ___%

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