As a member of the finance department of Ranchmanufacturing your supervisor has

As a member of the finance department of Ranchmanufacturing your supervisor has asked you to compute theappropriate discount rate to use when evaluating the purchase ofnew packaging equipment for the plant. Under the assumption thatthe firms present capital structure reflects the appropriate mixof capital sources for the firm you have determined the marketvalue of the firms capital structure as follows: Bonds -$4400000 ; Preferred Stock $1600000 ; Common Stock -$5800000.To finance the purchase Ranch will sell 10 year bondspaying 7.1% per year at the market price of $1052 preferred stockpaying a $2.07 dividend can be sold for $25.28. Common stock iscurrently selling for 55.07 per share and the firm paid 3.03dividend last year. The dividends are expected to grow at a rate of5.5% per year into the indefinite future. If the firms tax rate is30% what discount rate should you use to evaluate the equipmentpurchase?