Chapter 14 Question 16 Input Area: 16. Finding the WACC [ LO3] Lingenburger Cheese Corporation has 6.4 million shares of common stock outstanding, 200,000 shares of 3.8 percent preferred stock outstanding, par value of $100, and 120,000 bonds with a semiannual coupon of 4.8 percent outstanding, par value $1,000 each. The common stock currently sells for $54 per share and has a beta of 1.08 , the preferred stock currently sells for $103 per share, and the bonds have 15 years to maturity and sell for 107 percent of par. The market risk premium is 7.5 percent, T-bills are yielding 2.4 percent, and the company's tax rate is 22 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? Output Area: a. Market value of debt Market value of equity Market value of preferred Market value of firm DN EN PN b. For projects equally as risky as the firm itself, the WACC should be used as the discount rate. Pretax cost of debt Aftertax cost of debt Cost of equity Cost of preferred