Question
Titan Mining Corporation has 9.2 million shares of common stock outstanding along with 360,000 shares of 5 percent preferred stock outstanding. The company also has
Titan Mining Corporation has 9.2 million shares of common stock outstanding along with 360,000 shares of 5 percent preferred stock outstanding. The company also has 190,000 bonds outstanding, each with a par value of $1,000 and currently yielding 6.82 percent. The common stock currently sells for $40 per share and has a beta of 1.60, the preferred stock currently sells for $90 per share, and the bonds have 15 years to maturity and sell for 111 percent of par. The market risk premium is 8 percent, T-bills are yielding 5 percent, and the companys tax rate is 40 percent. a. What is the firms market value capital structure? (Enter as decimal, NOT percent. Do not round intermediate calculations. Round your answers to 4 decimal places, e.g., 0.1616) Market value weight Debt Preferred stock Equity b. What is the firms cost of debt and equity capital? (Enter as percent and do not round intermediate calculations. Round your answers to 4 decimal places, e.g., 32.1616.) Cost of Capital Debt % Preferred stock % Common Stock % c. If the company is evaluating a new investment project that has the same risk as the firms typical project, what rate should the firm use to discount the projects cash flows? (Enter as a percent and do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Discount rate %
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