B)If the firm 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? Hint: the firm’s WACC is the appropriate discount rate. Compute Hankins’ WACC:
. What is the cost of equity using CAPM?
. If the YTM of the bonds is 5.93%, and YTM represents the cost of debt, what is the after-tax cost of this debt?
. What is the cost of the firm’s preferred stock?
. Based on this information, what is the WACC for Hankins Corporation?
