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BF is looking to expand its existing operations. Prior to investment decision, BF must determine its appropriate discount rate. The following information relates to BF

BF is looking to expand its existing operations. Prior to investment decision, BF must determine its appropriate discount rate. The following information relates to BF existing (book value) capital structure.

-Debentures (Original Maturity 18 years) $20,000,000

-Preferred Shares: $4,000,000

-Retained Earnings: $18,000,000

-Total: 50,000,000

The yield on 91-day Government of Canada Treasury Bills is currently 11.78%. The debentures, which have been outstanding for three years, have a coupon rate of 14%. Current market yields on this risk security are currently about 12.5%. Floatation costs would be 2% of the issue price.

The common shares, of which there are 5 million outstanding, are currently priced at $5 per share/ The current dividend is $0.10 per share. BH's beta is 1.2 and its projected growth rate is 16% annually. Floatation expenses would be 5% of the existing share price.

Assuming a tax rate of 41%, calculate the WACC using market value weightings

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