Question: Space Capital Corp. has 2 2 5 , 0 0 0 shares of stocks outstanding, and 1 0 , 0 0 0 bonds with 5

Space Capital Corp. has 225,000 shares of stocks outstanding, and 10,000 bonds with 5.1% coupon rate (semiannually paid), par value $1,000 each. The common stock currently sells for $77 per share and has a beta of 0.95, and the bonds have 20 years to maturity and sell for 105% of par value. The market risk premium is 7%, T-bills are yielding 3.5%, and the companys tax rate is 21%. If the company is evaluating a new investment project that has the same risk as the firms typical project, what rate should the firm use to discount the projects cash flows? (Please express the value as percentages and keep two digits after the decimal point e.g,1.23%. Note: if your answer is 1.23%, please just enter 1.23 in the blank below.)

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