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Problem 1 4 - 1 6 Finding the WACC [ LO 3 ] Lingenburger Cheese Corporation has 6 . 3 million shares of common stock

Problem 14-16 Finding the WACC [LO3]
Lingenburger Cheese Corporation has 6.3 million shares of common stock outstanding,
220,000 shares of 3.6 percent preferred stock outstanding, and 105,000 bonds with a
semiannual coupon rate of 5.3 percent outstanding, par value $1,000 each. The common
stock currently sells for $73 per share and has a beta of 1.15, the preferred stock has a
par value of $100 and currently sells for $83 per share, and the bonds have 17 years to
maturity and sell for 107 percent of par. The market risk premium is 7.1 percent, T-bills are
yielding 3.1 percent, and the company's tax rate is 23 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.,.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.,32.16.)
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