Question
As a member of the Finance Department of Ranch Manufacturing, your supervisor has asked you to compute the appropriate discount rate to use when evaluating
As a member of the Finance Department of Ranch Manufacturing, your supervisor has asked you to compute the appropriate discount rate to use when evaluating the purchase of new packaging equipment for the plant. Under the assumption that the firm's present capital structure reflects the appropriate mix of capital sources for the firm, you have determined the market value of the firm's capital structure as follows:
Source of Capital: Bonds with Market Value of 4,200,000, Preferred stock with Market Value of 1,800,000 and Common stock with Market Value of 5,800,000.
to finance the puchase, Ranch Manufacturing will sell 10-year bonds paying 7.3% per year at the market price of $1,061. Preferred stock paying @2.03 dividend can be sold for $24.35. Common stock for Ranch Manufacturing is currently selling for $54.77 a rate of 5.1% per year into the indefinite future. If the firm's tax rate is 30%, what is discount rate should you use to evaluate the quipment purchase?
Ranch Manufacturing's WACC is ___% (Round to three decimal places.)
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