Delta Corporation has 5.5 million shares of common stock outstanding. The common stock currently sells for $45 per share and has a beta of 1.10. Delta Corporation has also 60,000 bonds outstanding per value $ 1,000 each, and 7.6 percent semiannual coupon rate. The bonds have 10 year to maturity and sell for 75 percent of par. • Tax rate is 39 percent. • The market risk premium is 6.5% • T-bills are yielding 7 percent
a) What is the company’s market value structure?
b) What is the company’s cost of equity (Re)?
c) What is the company’s weight average cost of capital (WACC)? d) If Delta is evaluating a new investment project that has the same risk as the company’s typical project, what rate should the company use to discount the projects cash flows?