Reference no: EM132873125

Question 1: Apple Corporation has 5 million shares of common stock outstanding, 200,000 shares of 3.5 percent preferred stock outstanding, and 100,000 bonds with a semiannual coupon rate of 6 percent outstanding, par value $1,000 each. The common stock currently sells for $70 per share and has a beta of 1.5, the preferred stock has a par value of $100 and currently sells for $80 per share, and the bonds have 10 years to maturity and sell for 102 percent of par. The market risk premium is 8.5 percent, T-bills are yielding 1 percent, and the company's tax rate is 30 percent. If the company is evaluating a new investment project that has the same risk as the firm's typical project, the discount rate for the project's cash flows should be _____%. (Do not include percentage sign. Do not round intermediate calculations enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)