Question 2. (6 points)

Your firm has 100,000 shares of stock, each selling for $10, and 1000 bonds, each trading at $1000 and yielding 7.23 percent. In addition, the firm has 40,000 shares of preferred stock trading at $25. The preferred stock has a has an annual dividend of $2.25. If the firm has a 40 percent marginal tax rate and the stock has a beta of 1.5, the risk-free rate is 2%, and the market risk premium is 7%. what is its WACC? (4 points)

Your firm just finished the fiscal year with $40 millions free cash flows. The free cash flows are expected to grow at 5% per year in a foreseeable future. What is the current value of your firm? (2 points)