Question: acme Services CFO is considering whether to take on a new project that has average risk. She has collected the following information: The company has
acme Services CFO is considering whether to take on a new project that has average risk. She has collected the following information: The company has outstanding bonds that mature in 15 years. The bonds have a face value of $1,000, an annual coupon of 7.5%, and sell in the market today for $1150. There are 15,000 bonds outstanding. The risk-free rate is 3% . The market risk premium is 5% . The stocks beta is 0.9 . The companys tax rate is 35%. The company has 100,000 shares of preferred stock with a par value of $100. These shares are currently trading at $73, and pay an annual dividend of $3.50. The company also has 2,250,000 common shares trading at $15. These shares last paid an annual dividend of $0.33. What is Acme's... a. weight of common shares b. before tax cost of acmes debt c. preferred shares d. value of debt e. weight of debt f. firm value
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