You are working as a consultant to the LuLu Althletic clothing company and you have been asked to compute the appropiate discount rate to use in the elevation of the purchase of a new warehouse facility. you have determined the market value of the firms current capital structure as follows:

To finance the purchase Lulu will sell 20 year bonds with $1000 par value paying 6.0% per year at the market price of $1020. Preferred stock paying a $2.50 dividend can be sold for $35. Common stock for Lulu is currently selling for $50 per share. The firm paid a four dollar Divet in last year and expects dividends to continue growing at a rate of 4.0% per year for the indefinite future. The firms marginal tax rate is 34%. What discount rate should you use to elevate the warehouse project

to two decimal places.) * Data Table Source of Capital Bonds Preferred stock Common stock Market Values $300,000 $200,000 $500,000 Print Done wer Clear All