Hankins Corporation has 8.9 million shares of common stock outstanding, 640,000 shares of 7.4 percent preferred stock outstanding, and 189,000 of 8.6 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $65.40 per share and has a beta of 1.34, the preferred stock currently sells for $106.60 per share, and the bonds have 13 years to maturity and sell for 89 percent of par. The market risk premium is 7 percent, T-bills are yielding 5.7 percent, and the firm’s tax rate is 35 percent. If the firm is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should the firm use to discount the project’s cash flows
Hankins Corporation has 8.9 million shares of common stock outstanding, 640,000 shares of 7.4 percent
If the firm is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should the firm use to discount the project’s cash flows
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images