Finding the WACC [LO3] Titan Mining Corporation has 9 million shares of 16. common stock outstanding, 250,000 shares of 6 percent preferred stock outstanding, and 105,000 7.5 percent semiannual bonds outstanding, par value of $1,000 each. The common stock currently sells for $34 per share and has a beta of 1.25, the preferred stock currently sells for $91 per share, and the bonds have 15 years to maturity and sell for 93 percent of par. The market risk premium is 8.5 percent, T-bills are yielding 5 percent, and Titan Mining's tax rate is 35 percent. a. What is the firm's market value capital structure? b. If Titan 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?
Finding the WACC [LO3] Titan Mining Corporation has 9 million shares of 16. common stock outstanding, 250,000 shares of 6 percent preferred stock outstanding, and 105,000 7.5 percent semiannual bonds outstanding, par value of $1,000 each. The common stock currently sells for $34 per share and has a beta of 1.25, the preferred stock currently sells for $91 per share, and the bonds have 15 years to maturity and sell for 93 percent of par. The market risk premium is 8.5 percent, T-bills are yielding 5 percent, and Titan Mining's tax rate is 35 percent. a. What is the firm's market value capital structure? b. If Titan 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?
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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![Finding the WACC [LO3] Titan Mining Corporation has 9 million shares of
16.
common stock outstanding, 250,000 shares of 6 percent preferred stock
outstanding, and 105,000 7.5 percent semiannual bonds outstanding, par value of
$1,000 each. The common stock currently sells for $34 per share and has a beta of
1.25, the preferred stock currently sells for $91 per share, and the bonds have
15 years to maturity and sell for 93 percent of par. The market risk premium is
8.5 percent, T-bills are yielding 5 percent, and Titan Mining's tax rate is 35 percent.
a. What is the firm's market value capital structure?
b. If Titan 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?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3196e4ab-e235-4496-956d-e3d5aa726ff3%2Fcaafbabb-e188-4a6b-b20f-ff47a358401f%2Fjag3447.jpeg&w=3840&q=75)
Transcribed Image Text:Finding the WACC [LO3] Titan Mining Corporation has 9 million shares of
16.
common stock outstanding, 250,000 shares of 6 percent preferred stock
outstanding, and 105,000 7.5 percent semiannual bonds outstanding, par value of
$1,000 each. The common stock currently sells for $34 per share and has a beta of
1.25, the preferred stock currently sells for $91 per share, and the bonds have
15 years to maturity and sell for 93 percent of par. The market risk premium is
8.5 percent, T-bills are yielding 5 percent, and Titan Mining's tax rate is 35 percent.
a. What is the firm's market value capital structure?
b. If Titan 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?
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