1) Organic create Corporation has 6.3 million shares of common stock outstanding, 350,000 shares of 5.8 favoured stock outstanding, and 150,000 of 7.1% semi annual bonds outstanding, par value $1,000 each. Common stock presently sells for $74 per share and has beta of 1.09, the favoured stock presently sells for= $107 per share, and bonds have 20 years to maturity and sell for 109% of par. Market risk premium is 6.8%, T-bills are yielding 4.3%, and firm’s tax rate is 34%
Required:
a) Determine the firm's market value capital structure?
i) Market value weight of debt
ii) Market value weight of preferred stock
iii) Market value weight of equity
b) If firm is estimating new investment project that has same risk as firm’s typical project, what rate must the firm use to discount project’s cash flows?
c) Weighted average cost of capital %