Reference no: EM132497843

Raymond Mining Corporation has 9.7 million shares of common stock outstanding, 410,000 shares of 4% $100 par value preferred stock outstanding, and 167,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $45 per share and has a beta of 1.35, the preferred stock currently sells for $94 per share, and the bonds have 10 years to maturity and sell for 116% of par. The market risk premium is 8.5%, T-bills are yielding 5%, and Raymond Mining's tax is 35%.

a. What is the firm's market value capital structure? (Enter your answers in whole dollars.)

Market valueDebt$ 193720000

193720000 Correct

Equity$ 436500000

436500000 Correct

Preferred stock$ 38540000

38540000 Correct

b. If Raymond Mining 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? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 3 decimal places.)

Discount rate (Only this is required)