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As a consultant to Maju Corporation, you have been asked to compute the appropriate discount rate to use in the evaluation of the purchase of

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As a consultant to Maju Corporation, you have been asked to compute the appropriate discount rate to use in the evaluation of the purchase of a new warehouse facility. You have determined the market value of the firm's current capital structure (which the firm considers to be its target mix of financing sources) as follows: To finance the purchase, Maju will sell 20-year bonds with a RM1,000 par value paying 6% per year (with interest paid semiannually) at the market price of RM1,020. Preferred stock paying a RM2.50 dividend can be sold for RM35. Common stock for Maju is currently selling for RM50 per share. The firm paid a RM4 dividend last year and expects dividends to continue growing at a rate of 4% per year for the indefinite future. The firm's marginal tax rate is 34%. What firm's weighted average cost of capital (WACC) should you use to evaluate the warehouse project? (Hint cost of debt use interpolation method). As a consultant to Maju Corporation, you have been asked to compute the appropriate discount rate to use in the evaluation of the purchase of a new warehouse facility. You have determined the market value of the firm's current capital structure (which the firm considers to be its target mix of financing sources) as follows: To finance the purchase, Maju will sell 20-year bonds with a RM1,000 par value paying 6% per year (with interest paid semiannually) at the market price of RM1,020. Preferred stock paying a RM2.50 dividend can be sold for RM35. Common stock for Maju is currently selling for RM50 per share. The firm paid a RM4 dividend last year and expects dividends to continue growing at a rate of 4% per year for the indefinite future. The firm's marginal tax rate is 34%. What firm's weighted average cost of capital (WACC) should you use to evaluate the warehouse project? (Hint cost of debt use interpolation method)

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