Hankins Corporation has 5.4 million shares of

common stock outstanding, 290,000 shares of 5.6 percent preferred stock

outstanding, and 125,000 of 6.7 percent semiannual bonds outstanding, par

value $1,000 each. The common stock currently sells for $64 per share and

has a beta of 1.13, the preferred stock currently sells for $103 per share,

and the bonds have 20 years to maturity and sell for 109 percent of par. The

market risk premium is 6.8 percent, T-bills are yielding 4.3 percent, and the

firm's tax rate is 34 percent.

a. What is the firm's market value capital structure?

b. If the firm 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?