Multiplex Entertainment has 9 million common shares outstanding, 250,000 preferred shares with a 6% dividend, and 105,000 semi-annual bonds at 7.5% (with par value of $1000 each).Common shares sell at $34/share (beta 1.25), preferred stock at $91/share, and the bonds at 93% of par with 15 years to maturity.The market risk premium is 8.5%, T-Bills are yielding 5%, and the corporate tax rate is 35%.
What is the Multiplex Entertainment's WACC?
If Multiplex Entertainment is evaluating a new investment project with the same risk as the firm's typical projects, what should the firm use to discount the project's cash flows?

Question

Quizplus · Accepted Answer

The Answer of Multiplex Entertainment has 9 million common shares outstanding, 250,000 preferred shares with a 6% dividend, and 105,000 semi-annual bonds at 7.5% (with par value of $1000 each).Common shares sell at $34/share (beta 1.25), preferred stock at $91/share, and the bonds at 93% of par with 15 years to maturity.The market risk premium is 8.5%, T-Bills are yielding 5%, and the corporate tax rate is 35%.
What is the Multiplex Entertainment's WACC?
If Multiplex Entertainment is evaluating a new investment project with the same risk as the firm's typical projects, what should the firm use to discount the project's cash flows?

Multiplex Entertainment Has 9 Million Common Shares Outstanding, 250,000 Preferred