Question
Titan Mining Corporation, Inc. is capitalized with 10,000,000 shares of common stock, 1,000,000 shares of preferred stock, and 800,000 5.50% ($1,000 par) coupon bonds, paid
Titan Mining Corporation, Inc. is capitalized with 10,000,000 shares of common stock, 1,000,000 shares of preferred stock, and 800,000 5.50% ($1,000 par) coupon bonds, paid semiannually. The bonds have 8 years left until maturity and are trading for 93% of par. The common stock currently sells for $40.72 per share and has a beta of 1.25. The company recently paid a common stock dividend of $4.35 per share, and such dividend is expected to grow at a rate of 4%, forever. The preferred stock, which has a 7.5% dividend, currently sells for $110.75 per share. The market return is 9.5%, T-Bills have a yield to maturity of 2.5%, and the companys marginal tax rate is 30%. Please compute the following, and show all of your work:
-The firms component cost of Common Stock,
-The firms before-tax component cost of Debt,
-The firms component cost of Preferred Stock,
-The firms After-Tax Weighted Average Cost of Capital.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started