Problem $14-16$ Finding the WACC $[$LO$3]$

$6\mathrm{.}25$

points

Lingenburger Cheese Corporation has $7\mathrm{.}2$ million shares of common stock outstanding,

$260,000$ shares of $4\mathrm{.}4$ percent preferred stock outstanding, and $145,000$ bonds with a

semiannual coupon rate of $5\mathrm{.}5$ percent outstanding, par value $$2,000$ each. The

common stock currently sells for $$65$ per share and has a beta of $1\mathrm{.}15,$ the preferred

stock has a par value of $$100$ and currently sells for $$91$ per share, and the bonds have

$15$ years to maturity and sell for $105$ percent of par. The market risk premium is $7\mathrm{.}5$

percent, T$-$bills are yielding $3\mathrm{.}1$ percent, and the company's tax rate is $21$ percent.

a$.$ What is the firm's market value capital structure? $($Do not round intermediate

calculations and round your answers to $4$ decimal places, e$.$g$.,\mathrm{.}1616.)$

b$.$ If the company 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 enter your answer as a percent

rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

Answer is complete but not entirely correct.