Question
Deep Mines has 14 million shares of common stock outstanding with a beta of 1.15 and a market price of $42 a share. There are
Deep Mines has 14 million shares of common stock outstanding with a beta of 1.15 and a market price of $42 a share. There are 900,000 shares of 9 percent preferred stock outstanding valued at $80 a share. The 10 percent semiannual bonds have a face value of $1,000 and are selling at 91 percent of par. There are 220,000 bonds outstanding that mature in 17 years. The market risk premium is 11.5 percent, T-bills are yielding 7.5 percent, and the firm's tax rate is 32 percent. What discount rate should the firm apply to a new project's cash flows if the project has the same risk as the firm's typical project?
rev: 12_09_2015_CS-35458
16.88 percent |
14.72 percent |
15.54 percent |
15.17 percent |
14.59 percent |
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