Multiplex Entertainment Has 9 Million Shares Outstanding,250,000 Shares of 6

question 32

Essay

Multiplex Entertainment has 9 million shares outstanding,250,000 shares of 6% preferred stock,and 105,000 semi-annual bonds at 7.5% (with par value of $1000 each).Common stock sells 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?

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Definitions:

Par Common Stock

The face value assigned to common stock shares, representing the minimum amount that can be credited to share capital; it is not necessarily indicative of the market value.

Journalize

The act of recording business transactions in the journal, noting the accounts affected and their debits and credits.

Paid-In Capital

The total amount of money shareholders have invested in the company through the purchase of its stock.

Par

The face value of a bond or other financial instrument, often used in reference to its original issue value.