16. Finding the WACC (LO4) Raymond Mining Corporation has $5 million shares of common stock outstanding. 250.000

shares of 5% preferred stock outstanding, and 135,000 7.5% semiannual bonds outstanding. par value $1,000 each. The

common stock currently sells for $34 per share and has a beta of 1.25, the preferred stock currently sells for $91 per share,

and the bonds have 15 years to maturity and sell for 114% of par. The market risk premium is 7.5%, T-bills are yielding 4%,

and the companys tax rate is 35%.

a. What is the firms market value capital structure?

4b. If Raymond Mining 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?

currently sells for 93% of its face value. The companys tax rate is 35%. Assume the par value of the bond is $1,000.

a, What is the pretax cost of debt?

+b, What is the after-tax cost of debt?

. Which is more relevant, the pre-tax or the after-tax cost of debt? Why?