Brodsky Metals Corporation has 8.1 million shares of common stock outstanding and 150,000 5.8 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $41 per share and has a beta of 1.08. The bonds have 20 years to maturity and sell for 104 percent of par. The market risk premium is 7 percent, T-bills are yielding 3.1 percent, and the tax rate is 23 percent.

a. What is the firm’s market value capital structure?

b. If the company 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?