a. What is the firm's market value capital structure? (Enter your answers in whole dollars.) Market value $ $ $ Debt Equity Preferred stock b. If Raymond Mining 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. Enter your answer as a percentage rounded to 3 decimal places.) % Discount

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
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Raymond Mining Corporation has 10.1 million shares of common stock outstanding, 450, 000 shares of 5% $100 par value preferred stock outstanding, and 175,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $49 per share and has a beta of 1.55, the preferred stock currently sells for $98 per share, and the bonds have 15 years to maturity and sell for 116% of par. The market risk premium is 8.9%, T-bills are yielding 4%, and Raymond Mining's tax rate is 38%. a. What is the firm's market value capital structure? (Enter your answers in whole dollars.) Market value $ $ $ Debt Equity Preferred stock b. If Raymond Mining 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. Enter your answer as a percentage rounded to 3 decimal places.) % Discount

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