Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hankins Corporation has 7.7 million shares of common stock outstanding, 520,000 shares of 7.2 percent preferred stock outstanding, and 177,000 of 8.4 percent semiannual bonds

image text in transcribed

Hankins Corporation has 7.7 million shares of common stock outstanding, 520,000 shares of 7.2 percent preferred stock outstanding, and 177,000 of 8.4 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $64.20 per share and has a beta of 1.22, the preferred stock has a par value of $100 and currently sells for $107.80 per share, and the bonds have 17 years to maturity and sell for 95 percent of par. The market risk premium is 6.9 percent, T-bills are yielding 5.6 percent, and the firm's tax rate is 38 percent. What is the firm's market value capital structure? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) Market value weight of debt Market value weight of preferred stock Market value weight of equity 2340 0780 6880 What is the firm's cost of each form of financing? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) of debt Aftertax cost Cost of preferred stock Cost of equity 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? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) Weighted average cost of capital

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

Step: 3

blur-text-image

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

The Money Book Of Personal Finance

Authors: Richard Eisenberg

1st Edition

0446524298, 9780446524292

More Books

Students also viewed these Finance questions

Question

When can you use a TM or an on your product?

Answered: 1 week ago