After seeing snapple's success with non-cola soft drinks and learning of Coke s and Pepsi'sinterest Healthy Food Products has decided to consider an expansion of its own in the fruit juice business. The product being considered is fresh lemon juice. Assume that you were recently hired as a consultant to the director of capital budgeting, and you must evaluate the new project. You are trying to assess some of the companys assumptions regarding the parameters used in the evaluation of the project. The following data describes the firm's current financial condition: The firm has one million bonds outstanding with face value of $100, a coupon rate of 6 percent per year (paid sem-annually) and maturity of 20 years. The current yield to maturity of the bonds is 7% (compounded semiannually) The firm also has 5 million common shares outstanding. The firm has just paid a (annual dividend of S1 2s and this dividend is expected to increase at a rate of 5% percent per year for ever The company s past equity returns have a standard deviation of 20 and a correlation with market returns of.6 The standard deviation of market returns during the same period is calculated at 15 These trends and relationships are expected to continue in the foreseeable future. Treasury Bills currently yield 3% while the expected return on the market is 8 percent. The firm also has 500,000 preferred shares outstanding. They were issued f years ago at a price of s40 per share to yield an annual d dividend of 10 percent. The current market price of these shares is S50.00 per share, The firm's tax rate is 40%