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Brodsky Metals Corporation has 9.4 million shares of common stock outstanding and 380,000 4 percent semiannual bonds outstanding, par value $1,000 each. The common stock
Brodsky Metals Corporation has 9.4 million shares of common stock outstanding and 380,000 4 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $42 per share and has a beta of 1.2. The bonds have 10 years to maturity and sell for 113 percent of par. The market risk premium is 8.2 percent, T-bills are yielding 3 percent, and the companys tax rate is 24 percent. | |
a. | What is the firm's market value capital structure? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) |
b. | If the company 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? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
a: Debt= ?
Equity= ?
B. Discount rate = ?
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