Raymond Mining Corporation has 8.2 million shares of common stock outstanding, 260,000 shares of 4% $100 par value preferred stock outstanding, and 137,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $30 per share and has a beta of 1.10, the preferred stock currently sells for $92 per share, and the bonds have 10 years to maturity and sell for 110% of par. The market risk premium is 7.0%, T-bills are yielding 3%, and Raymond Mining's tax is 38%. . What is the firm's market value capital structure? (Enter your answers in whole dollars.) Market value Debt $ Equity Preferred stock o. If Raymond Mining is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the irm use to discount the project's cash flows? (Do not round intermediate calculations. Enter your answer as a percentage rounded o 3 decimal places.) Discount rate

Raymond Mining Corporation has 8.2 million shares of common stock outstanding, 260,000 shares of 4% $100 par value preferred stock outstanding, and 137,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $30 per share and has a beta of 1.10, the preferred stock currently sells for $92 per share, and the bonds have 10 years to maturity and sell for 110% of par. The market risk premium is 7.0%, T-bills are yielding 3%, and Raymond Mining's tax is 38%. . What is the firm's market value capital structure? (Enter your answers in whole dollars.) Market value Debt $ Equity Preferred stock o. If Raymond Mining is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the irm use to discount the project's cash flows? (Do not round intermediate calculations. Enter your answer as a percentage rounded o 3 decimal places.) Discount rate

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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Information on Lightning Power Company, is shown below. Assume the company's tax rate is 22 percent. 18,200 6.1 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 107.8 percent of par; the bonds make semiannual payments. 620,000 shares outstanding, selling for $85.25 per share; beta is 1.15. 28,500 shares of 4.25 percent preferred stock outstanding, currently selling for $92.70 per share. The par value is $100. 6.8 percent market risk premium and 3.4 percent risk-free rate. Debt: Common stock: Preferred stock: Market: What is the company's cost of each form of financing? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. Cost of equity Aftertax cost of debt Cost of preferred stock Calculate the company's WACC. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. WACC % % 4.59 % 9.18 %
Pandora Manufacturing has 9 million shares of common stock outstanding. The current share price is $81, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $80 million and a coupon rate of 10 percent and sells for 96 percent of par. The second issue has a face value of $50 million and a coupon rate of 11 percent and sells for 104 percent of par. The first issue matures in 25 years, the second in 8 years. a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) b. What are the company's capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) c. Which are more relevant, the book or market value weights? a. Equity/Value Debt/Value b. Equity/Value Debt/Value More relevant C.
A corporation has 9,000 bonds outstanding with a 5% annual coupon rate, 7 years to maturity, a $1,000 face value, and a $1,200 market price. The company's 110,000 shares of preferred stock pay a $4 annual dividend, and sell for $40 per share. The company's 500,000 shares of common stock sell for $25 per share and have a beta of 1 The risk free rate is 5%, and the market return is 11%. Calculate cost of debt? Briefly show your steps. Calculate cost of preferred stock? Briefly show your steps. Calculate cost of equity? Briefly show your steps. what is company's pre-tax WACC? Briefly show your steps. What are the weight of debt, preferred stock and equity?Briefly show your steps.
es Lingenburger Cheese Corporation has 6.6 million shares of common stock outstanding, 235,000 shares of 3.9 percent preferred stock outstanding, par value of $100; and 120,000 bonds with a semiannual coupon rate of 5.6 percent outstanding, par value $1,000 each. The common stock currently sells for $70 per share and has a beta of 1.10, the preferred stock has a par value of $100 and currently sells for $86 per share, and the bonds have 15 years to maturity and sell for 104 percent of par. The market risk premium is 7.4 percent, T-bills are yielding 3.4 percent, and the company's tax rate is 21 percent. a. What are the firm's market value capital structure weights? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. 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 firm use to discount the project's cash flows? Note: Do not round intermediate calculations…
Lingenburger Cheese Corporation has 7.2 million shares of common stock outstanding, 260,000 shares of 4.4 percent preferred stock outstanding, par value of $100; and 145,000 bonds with a semiannual coupon rate of 5.5 percent outstanding, par value $2,000 each. The common stock currently sells for $65 per share and has a beta of 1.15, the preferred stock has a par value of $100 and currently sells for $91 per share, and the bonds have 15 years to maturity and sell for 105 percent of par. The market risk premium is 7.5 percent, T-bills are yielding 3.1 percent, and the company's tax rate is 21 percent. a. What are the firm's market value capital structure weights? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. 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 firm use to discount the project's cash flows? Note: Do not round intermediate calculations…
Dineage Corporation has 5 million shares of common stock outstanding. The current share price is $84, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $60 million, has a 7 percent coupon, and sells for 94 percent of par. The second issue has a face value of $35 million, has a 8 percent coupon, and sells for 107 percent of par. The first issue matures in 22 years, the second in 4 years. The most recent dividend was $5.6 and the dividend growth rate is 8 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 35 percent. What is the company's WACC?
Lingenburger Cheese Corporation has 6.3 million shares of common stock outstanding, 220,000 shares of 3.6 percent preferred stock outstanding, par value of $100; and 105,000 bonds with a semiannual coupon rate of 5.3 percent outstanding, par value $1,000 each. The common stock currently sells for $73 per share and has a beta of 115, the preferred stock has a par value of $100 and currently sells for $83 per share, and the bonds have 17 years to maturity and sell for 107 percent of par. The market risk premium is 7.1 percent, T-bills are yielding 3.1 percent, and the company's tax rate is 23 percent. a. What is the firm's market value capital structure? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. 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 firm use to discount the project's cash flows? Note: Do not round intermediate calculations enter your…
Given the following information for Huntington Electric Co., *Debt: 6,000 of 8 percent coupon bonds outstanding, $1,000 par value, 10 years to maturity, selling for 108 percent of par; the bonds make annual payments. *Preferred stock: 8000 shares of 7.2% preferred stock dividend rate, selling at $90 per share. *Common stock: 500,000 shares outstanding, selling for $70 per share; the beta is 1.12. *Market data: 10 percent market rate of return and 5 percent risk-free rate, and the corporate tax rate of 30%. What is the after tax, WACC of this company? What is the after-tax, WACC of this company? Group of answer choices .9.6639% 8% 9.9802% 10%
Lingenburger Cheese Corporation has 6.5 million shares of common stock outstanding, 230,000 shares of 3.8 percent preferred stock outstanding, par value of $100; and 115,000 bonds with a semiannual coupon rate of 5.5 percent outstanding, par value $1,000 each. The common stock currently sells for $71 per share and has a beta of 1.05, the preferred stock has a par value of $100 and currently sells for $85 per share, and the bonds have 19 years to maturity and sell for 109 percent of par. The market risk premium is 7.3 percent, T-bills are yielding 3.3 percent, and the company's tax rate is 25 percent. a. What is the firm's market value capital structure? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. 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 firm use to discount the project's cash flows? Note: Do not round intermediate calculations enter your…
Dani Corporation has 5 million shares of common stock outstanding. The current share price is $65, and the book value per share is $4. The company also has two bond issues outstanding. The first bond issue has a face value of $50 million, has a coupon rate of 5 percent, and sells for 90 percent of par. The second issue has a face value of $35 million, has a coupon rate of 4 percent, and sells for 102 percent of par. The first issue matures in 20 years, the second in 5 years. Both bonds make semiannual coupon payments. a. What are the company's capital structure weights on a book value basis? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. b. What are the company's capital structure weights on a market value basis? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. c. Which are more relevant, the book or market value weights? a. Equity/Value Debt/Value b. Equity/Value Debt/Value c.…
You are given the following information for Lightning Power Company. Assume the company's tax rate is 23 percent. 23,000 7.2 percent coupon bonds outstanding, $1,000 par value, 19 years to maturity, selling for 106 percent of par; the bonds make semiannual payments. 560,000 shares outstanding, selling for $74 per share; beta is 1.17. 25,000 shares of 5 percent preferred stock outstanding, a $100 par value, selling for $95 per share. 7 percent market risk premium and 5.1 percent risk-free rate. Debt: Common stock: Preferred stock: Market: What is the company's WACC? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. WACC %
Titan Mining Corporation has 7.6 million shares of common stock outstanding, 280,000 shares of 4.5 percent preferred stock outstanding, and 165,000 bonds with a semiannual coupon rate of 5.9 percent outstanding, par value $2,000 each. The common stock currently sells for $61 per share and has a beta of 1.15, the preferred stock has a par value of $100 and currently sells for $95 per share, and the bonds have 19 years to maturity and sell for 109 percent of par. The market risk premium is 7.1 percent, T-bills are yielding 3.5 percent, and the company’s tax rate is 25 percent. a. What is the firm’s debt, preferred stock and equity? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) 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 firm use to discount the project’s cash flows? (Do not round intermediate calculations enter your answer as a percent…

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