Problem:
To finance the purchase, Ranch Manufacturing will sell 10-year bonds paying 6.7% per year at the market price of $1,037. Preferred stock paying $1.92 dividend can be sold for $24.22. Common stock for Ranch Manufacturing is currently selling for $55.25 per share and the firm paid a $2.94 dividend last year. Dividends are expected to continue growing at a rate of 5.2% per year into the indefinite future. If the firm's tax rate is 30% what discount rate should you use to evaluate the equipment purchase?
Bonds Market Value: $4,400,000; Preferred Stock value is $2,400,000; Common Stock value is $6,000,000