Northstar Corp. has 10,000,000 shares of common stock outstanding, 2,000,000 shares of preferred stock outstanding, which pays 12 percent of $100 par value, and 100,000 4 percent semi-annual bonds outstanding, par value $1,000 each . The common stock currently sells for $33 per share and has a beta of 1.25, the preferred stock currently sells for $76, and the bonds have 11 years to maturity and sell for 90 percent of par. The market risk premium is 15 percent, T-bills are yielding 10 percent, and Northstar Corp.'s tax rate is 40 percent.
Note: Please make sure your final answers are in percentage form and are accurate to 2 decimal places. (For example: 34.56%)
a) What is the firm's market value capital structure (weight of debt, common equity and preferred stock)?
Market Value Weight of Debt=%?
Market Value Weight of Common Equity=%?
Market Value Weight of Preferred Stock=%
b) If Northstar Corp. 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? (As you go through the steps to find your answer, please try and keep it as accurate as possible.)
find WACC =%?