| Titan Mining Corporation has 8.7 million shares of common stock outstanding and 310,000 6 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $35 per share and has a beta of 1.35, and the bonds have 20 years to maturity and sell for 116 percent of par. The market risk premium is 7.5 percent, T-bills are yielding 5 percent, and the companys tax rate is 30 percent. |
| a. | What is the firm's market value capital structure?(Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) |
| b. | If the company 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?(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
Filer Manufacturing has 4 million shares of common stock outstanding. The current share price is $70, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value $60 million, a coupon of5 percent, and sells for 95 percent of par. The second issue has a face value of $40 million, a coupon of6 percent, and sells for 104 percent of par. The first issue matures in 20 years, the second in 4 years. |
| a. | What are the company's capital structure weights on a book value basis?(Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) |
| | | Equity / Value | | | Debt / Value | | | b. | What are the company's capital structure weights on a market value basis?(Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) |
| | | Equity / Value | | | Debt / Value | | | c. | Which are more relevant? | | | | | Market value weights | | Book value weights | | Mullineaux Corporation has a target capital structure of 70 percent common stock and 30 percent debt. Its cost of equity is 16 percent, and the cost of debt is 8 percent. The relevant tax rate is 30 percent. | | | What is the companys WACC?(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) | Siblings, Inc., is expected to maintain a constant 6.6 percent growth rate in its dividends, indefinitely. The company has a dividend yield of 8.4 percent. |
| What is the required return on the company's stock?(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
The next dividend payment by ECY, Inc., will be $1.84 per share. The dividends are anticipated to maintain a growth rate of 5 percent, forever. The stock currently sells for $36 per share. |
| What is the required return?(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
The next dividend payment by ECY, Inc., will be $1.40 per share. The dividends are anticipated to maintain a growth rate of 6 percent, forever. The stock currently sells for $25 per share. |
| What is the dividend yield?(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| What is the expected capital gains yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
Assuming semiannual compounding, what is the price of azero coupon bond with 8 years to maturity paying $1,000 at maturity if the YTM is(Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.): |
