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Titan Mining Corporation has 7.1 million shares of common stock outstanding, 255,000 shares of 4.3 percent...

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Finance

Titan Mining Corporation has 7.1 million shares of common stockoutstanding, 255,000 shares of 4.3 percent preferred stockoutstanding, and 140,000 bonds with a semiannual coupon rate of 5.6percent outstanding, par value $1,000 each. The common stockcurrently sells for $66 per share and has a beta of 1.10, thepreferred stock has a par value of $100 and currently sells for $90per share, and the bonds have 19 years to maturity and sell for 108percent of par. The market risk premium is 7.6 percent, T-bills areyielding 2.9 percent, and the company’s tax rate is 25 percent.

a.

What is the firm’s market value capital structure? (Donot round intermediate calculations and round your answers to 4decimal places, e.g., .1616.)

b.If the company is evaluating a new investment project that hasthe same risk as the firm’s typical project, what rate should thefirm use to discount the project’s cash flows? (Do notround intermediate calculations enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)


    

a.Debt
Preferred stock
Equity
b.Discount rate%

Answer & Explanation Solved by verified expert
4.0 Ratings (788 Votes)
a MV of equityPrice of equitynumber of shares outstanding MV of equity667100000 468600000 MV of BondPar valuebonds outstandingage of par MV of Bond1000140000108 151200000 MV of Preferred equityPricenumber of shares outstanding MV of Preferred    See Answer
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