1. Suppose that the firm you work for has issues of debt, common stock and preferred stock and you have been tasked with calculating the firms weighted average cost of capital.

You have collected the following relevant information:

Debt: there are 8000 6.5% coupon bonds outstanding, each with a face value of $1000, 20 years remaining to maturity, currently selling at 92% of face value. The bonds make semiannual payments.

Common stock: 250,000 shares outstanding. currently selling at $57 per share, the beta for the firm is 1.05.

Preferred Stock: there are 15,000 shares of preferred stock selling at $93 that pay a fixed dividend of $5 per share.

We can also assume the corporate tax rate is 35%

You have also found the current risk-free rate to be equal to 4.5% and the Expected Return on the Market portfolio to be 12.5%.

1. Calculate the firms weighted average cost of capital.
2. Suppose you are tasked with evaluating whether to undertake a new project that has the same risk as the firms typical project. Describe in no more than two sentences how you evaluate this project.