Question
Titan Mining Corporation has 9 million shares of common stock outstanding and 340,000 6 percent semiannual bonds outstanding, par value $1,000 each. The common stock
Titan Mining Corporation has 9 million shares of common stock outstanding and 340,000 6 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $38 per share and has a beta of 1.5, and the bonds have 20 years to maturity and sell for 119 percent of par. The market risk premium is 7.8 percent, T-bills are yielding 3 percent, and the company's tax rate is 36 percent.
What is the firm's market value capital structure?
Weight
Debt4.54?
Equity 6.14?
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?
Discount Rate 9.20%?
Could you tell me where I am going wrong?
Could you provide thecorrections in the equations that I am missing.
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