Question
Organic Produce Corporation has 8.2 million shares of common stock outstanding, 570,000 shares of 7.2 percent preferred stock outstanding, and 182,000 of 8.4 percent semiannual
Organic Produce Corporation has 8.2 million shares of common stock outstanding, 570,000 shares of 7.2 percent preferred stock outstanding, and 182,000 of 8.4 percent semiannual bonds outstanding, par value $1,000 each. the common stock currently sells for $64.70 per share and has a beta of 1.27, the preferred stock currently sells for $107.30 per share, and the bonds have 17 years to maturity and sell for 92.5 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. 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? (Do not round intermediate calculations. Round your answers to 4 decimal places)
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