Use the following information about a firm to estimate the firms weighted average cost of capital.

• The firms market value of debt is $95,250,000.
• The firm has 375,000 shares of preferred stock outstanding trading at $69.14 per share. The preferred stock cash dividend is $5.85 per share.
• The firm has 3,649,000 shares of common stock outstanding, trading at $46.29 per share.
• The common stocks beta is 1.59.
• The yield on the firms debt is 6.5%.
• The risk-free rate is 1.5% and the expected market return is 7%.
• The firms marginal tax rate is 25%.

The firm, which is diversified across industries, is considering undertaking a new project within a specific sector. Is it a good idea to use the companys cost of capital to estimate the projects NPV? If not, how could you compute the projects cost of capital?

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