Independence Mining Corporation has 7 million shares of commonstock outstanding, 1 million shares of 6% preferred stockoutstanding, and 100,000 9% semiannual bonds outstanding, par value$1000 each. The common stock currently sells for $35 per share andhas a beta of 1.0, the preferred stock currently sells for $60 pershare, and the bonds have 15 years to maturity and sell for 89% ofpar. The market risk premium is 8%, T- bills are yielding 7%, andIndependence Mining’s tax rate is 34%. a. What is the firm’s marketvalue capital structure? b. If Independence Mining is evaluating anew investment project that has the same risk as the firm’s typicalproject, what rate should the firm use to discount the project’scash flows?
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