Look at the below book-value balance sheet for Universal Corporation. The preferred stock currently sells for 15 per share and pays a dividend of 2 a share. The common stock currently sells for 20 per share and has a beta of 0.8. The bonds currently sell at 935.82. The market risk premium is 10%, the risk-free rate is 6%, and the firm's tax rate is 40%.

Instructions:

1. Calculate the firm's outstanding number of bonds, preferred shares and common shares.

2. Calculate the firm's market value capital structure.

3. Calculate the firm's costs of common equity, preferred stock and debt.

4. Calculate the weighted average cost of capital.

5. If the firm is considering an average risk project with an internal rate of return of 14%, should it accept the project? Explain.