Titan Mining Corporation has 8.2 million shares of common stock outstanding, 260,000 shares of 4 percent preferred stock outstanding, and 140,000 7 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $30 per share and has a beta of 1.10, the preferred stock currently sells for $80 per share, and the bonds have 10 years to maturity and sell for 110 percent of par. The market risk premium is 7 percent, T-bills are yielding 3 percent, and the companyâs tax rate is 38 percent.
a. What is the firmâs market value capital structure? (Do not round intermediate calculations. Round your answers to 4 decimal places, e.g., 32.1616.)
Market value weight Debt Preferred stock Equity
b. If the company is evaluating a new investment project that has the same risk as the firmâs typical project, what rate should the firm use to discount the projectâs cash flows? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Discount rate %
| Titan Mining Corporation has 8.2 million shares of common stock outstanding, 260,000 shares of 4 percent preferred stock outstanding, and 140,000 7 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $30 per share and has a beta of 1.10, the preferred stock currently sells for $80 per share, and the bonds have 10 years to maturity and sell for 110 percent of par. The market risk premium is 7 percent, T-bills are yielding 3 percent, and the companyâs tax rate is 38 percent. |
| a. | What is the firmâs market value capital structure? (Do not round intermediate calculations. Round your answers to 4 decimal places, e.g., 32.1616.) |
| Market value weight | |
| Debt | |
| Preferred stock | |
| Equity | |
| b. | If the company is evaluating a new investment project that has the same risk as the firmâs typical project, what rate should the firm use to discount the projectâs cash flows? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Discount rate | % |
Related questions
| Titan Mining Corporation has 8.2 million shares of common stock outstanding, 260,000 shares of 4 percent preferred stock outstanding, and 140,000 7 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $30 per share and has a beta of 1.10, the preferred stock currently sells for $80 per share, and the bonds have 10 years to maturity and sell for 110 percent of par. The market risk premium is 7 percent, T-bills are yielding 3 percent, and the companyâs tax rate is 38 percent. |
| a. | What is the firmâs market value capital structure? (Do not round intermediate calculations. Round your answers to 4 decimal places, e.g., 32.1616.) |
| Market value weight | |
| Debt | |
| Preferred stock | |
| Equity | |
| b. | If the company is evaluating a new investment project that has the same risk as the firmâs typical project, what rate should the firm use to discount the projectâs cash flows? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Discount rate | % |
| Titan Mining Corporation has 9.4 million shares of common stock outstanding, 380,000 shares of 4 percent preferred stock outstanding, and 200,000 8.2 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $42 per share and has a beta of 1.20, the preferred stock currently sells for $92 per share, and the bonds have 10 years to maturity and sell for 113 percent of par. The market risk premium is 8.2 percent, T-bills are yielding 3 percent, and the companyâs tax rate is 35 percent. |
| a. | What is the firmâs market value capital structure? (Do not round intermediate calculations. Round your answers to 4 decimal places, e.g., 32.1616.) |
| Market value weight | |
| Debt | |
| Preferred stock | |
| Equity | |
| b. | If the company is evaluating a new investment project that has the same risk as the firmâs typical project, what rate should the firm use to discount the projectâs cash flows? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
