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6. (Chapter 13) Loredo Mining Inc. has 20 million shares of common stock outstanding and 500,000 7 percent annual coupon bonds outstanding, par value $1,000 each. The common stock currently sells for $20 per share and has a beta of 1.3, and the bonds have 12 years to maturity and sell for 100 percent of par. The market risk premium is 7 percent, T-bills are yielding 5 percent, and Loredos tax rate is 21 percent. a. What is the firms market value capital structure? b. If Loredo 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? (Hint: Calculate the WACC.)

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