The market risk premium for FCIB is 9 percent and has a tax rate of 35 percent. The risk-free rate of interest is 5%. Willow-Woods Inc. has a capital structure comprised of the following:

8,500,000 shares of common stock outstanding, 200,000 shares of 7 percent preferred stock outstanding, and 85,000, 8.5 percent semiannual bonds outstanding, par value of $1,000 each.

The common stock currently sells for $34 per share and has a beta of 1.2, the preferred stock currently sells for $83 per share, and the bonds have 15 years to maturity and sell for 93 percent of par.

a) What is the market value of Willow-Woods' capital structure?

b) What rate should Willow-Woods use to discount the cash flows of a new investment project that has the same risk as the company's typical project?