12. Finding the WACC Titan Mining Corporation has 6.4 million shares of common stock outstanding and 175,000 6.2 percentsemiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $53 per share and has a beta of 1.15; thebonds have 25 years to maturity and sell for 106 percent of par. The market risk premium is 6.8 percent, T-bills are yielding 3.1 percent,and the company's tax rate is 22 percent.a. What is the firm's market value capital structure?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 firmuse to discount the project's cash flows?

Capital structure is the combination of debt and equity that a firm uses to finance its assets.

Answered: 12. Finding the WACC Titan Mining…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Firm Z has issued 1,000,000 bonds. Each bond is priced at $929 and has a face value of $1000. It pays annual coupon payments and has a coupon rate of 3%. The bonds will mature in 20 years. Stock price of Firm Z is $10, and there are 50 million shares outstanding. There are 2 million shares of preferred stock, which offers $2 dividend and is priced at $40. Equity beta of Firm Z is 1.5 and current market portffolio yields 8% and the risk free rate is 2%. Corproate tax rate is 30%. Find the costs of debt, equity, preferred stock and WACC. Please show your work.
am. 33.
A company is considering an iron ore extraction project that requires an initial investment of $508,000 and will yield annual cash inflows of $152,000 for four years. The company's discount rate is 9%. What is the NPV of the project? Present value of an ordinary annuity of $1: 8% 9% 10% 1 2 3 4 5 6 7 8 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 OA $101,600 OB. $15,520 OC. $(15,520) OD. $(101,000) 0.917 1.759 2.531 3.24 3.89 4.486 5.033 5.535 0.909 1.736 2.487 3.17 3.791 4.355 4.668 5.335
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A 16. Subject:- finance
#18
8 The Flying Dove has 1,600 bonds outstanding with a $1,000 par value, a coupon rate of 5.5 percent, 12 years to maturity, annual interest payments, and a market price equal to par. The firm also has 52,000 shares of common stock outstanding at a price per share of $43 and a beta of 1.3. The risk-free rate is 3 percent, the market risk premium is 7 percent, and the tax rate is 35 percent. What is the company's WACC?
Market Values of Capital• The company has 81,000 bonds with a 30-year life outstanding, with 15 years untilmaturity. The bonds carry a 10 percent semi-annual coupon, and are currently sellingfor $899.24.• The company also has 150,000 shares of $100 par, 9% dividend perpetual preferredstock outstanding. The current market price is $90.00. Any new issues of preferredstock would incur a 3.6% per share flotation cost.• The company has 5 million shares of common stock outstanding with a current priceof $29.84 per share. The stock exhibits a constant growth rate of 10 percent. The lastdividend (D0) was $.80. New stock could be sold with flotation costs of 6.7% pershare.• The risk-free rate is currently 6 percent, and the rate of return on the stock market as awhole is 13 percent. Your stock’s beta is 1.18.• Your firm does not use notes payable for long-term financing.• Your firm’s federal + state marginal tax rate is 28%.• For all projects, the reinvestment rate shall be 9.5%…
Adler Petroleum has the following capital structure: Bonds $ 1,500,000 Preferred shares 3,000,000 Common shares 3,000,000 Retained earnings 4,000,000 $ 11,500,000 The existing bonds have a coupon rate of 14 percent with 25 years left to maturity, but new 25 year bonds to be sold at par ($1,000) will have an annual yield rate of 10 percent. After tax flotation costs of 4 percent would be expected on the new issue. Please use annual analysis. The existing preferred shares have a $40 face value and an annual dividend rate of 12 percent. New preferred shares having a $60 face value could be sold at a $58.50 with an 9.5 percent dividend rate. Flotation costs would be 3 percent after tax. Outstanding common shares were originally sold for $2 per share. The market price is currently at $5 per share and they have a dividend of $0.20 D0. They have growth rate of 10%. New shares would be issued at 5 percent discount from the…
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