Titan Mining Corporation has 8.5 million shares of common stock outstanding, 250,000 shares of 5 percent preferred stock outstanding and 135,000 7.5 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $34 per share and has a beta of 1.25, the preferred stock currently sells for $91 per share, and the bonds have 15 years to maturity and sell for 114 percent of par. The market risk premium is 7.5 percent, T-bills are yielding 4 percent, and Titan Mining's tax rate is 35 percent.

What is the firm 's market value capital structure?

If Titan Mining is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the firm use to discount the project's cash flows?

1. What is the KD? (Decimal answer to four decimal places)

2. What is the book value of preferred stock? (Round to whole number)

3. What is the market value of the equity? (Round to whole number)

4. What is the market value of the firm? (Round to whole number)

5. Preferred stock is what portion of the capital structure of the firm? (Decimal answer to four decimal places)

6. The weighted cost of equity is: (Decimal answer to four decimal places)

7. What is the weighted cost of capital? (Decimal answer to four decimal places)

8. If the cost to raise debt is 4%, the cost to raise preferred stock is 5% and the cost to raise equity is 8% what is the weighted average flotation cost? (Decimal answer to four decimal places)

9. If a firm plans to issue debt to finance their next project, then they should apply which flotation costs to the cost of the project?

The weighted flotation cost of debt

The flotation cost of debt (4%)

The average of the flotation costs

This weighted average flotation costs

None of the above