Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hankins Corporation has 7.7 million shares of common stock outstanding, 285,000 shares of 4.4 percent preferred stock outstanding, par value of $100; and 170,000 bonds

Hankins Corporation has 7.7 million shares of common stock outstanding, 285,000 shares of 4.4 percent preferred stock outstanding, par value of $100; and 170,000 bonds with a semiannual coupon rate of 6.1 percent outstanding, par value $2,000 each. The common stock currently sells for $60 per share and has a beta of 1.20, the preferred stock has a par value of $100 and currently sells for $96 per share, and the bonds have 15 years to maturity and sell for 104 percent of par. The market risk premium is 6.9 percent, T-bills are yielding 3.6 percent, and the companys tax rate is 21 percent. a. What is the firms 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 firms typical project, what rate should the firm use to discount the projects cash flows? (Do not round intermediate calculations enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Airline Management Finance

Authors: Victor Hughes

1st Edition

1138610690, 978-1138610699

More Books

Students also viewed these Finance questions