Raymond Mining Corporation has 8.5 million shares of common stock outstanding, 250,000 shares of 5% $100 par value preferredstock outstanding, and 135,000 7.5% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $34per 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 sellfor 114% of par. The market risk premium is 7.5%, T-bills are yielding 4%, and Raymond Mining's tax rate is 35%.a. What is the firm's market value capital structure? (Enter your answers in whole dollars.)DebtEquityPreferred stockMarket value$153,900,0$$ 22,750,00b. If Raymond Mining is evaluating a new investment project that has the same risk as the firm's typical project, what rate should thefirm use to discount the project's cash flows? (Do not round intermediate calculations. Enter your answer as a percentage roundedto 3 decimal places.)Discount rate0 %

Step 1:a). Market Price of Bond = Par Value*% Quoted price = $1000*114%= $1140Total Market Value of…

Answered: Raymond Mining Corporation has 8.5…

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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Western Electric has 34,000 shares of common stock outstanding at a price per share of $83 and a rate of return of 12.80 percent. The firm has 7,500 shares of 8.20 percent preferred stock outstanding at a price of $97.00 per share. The preferred stock has a par value of $100. The outstanding debt has a total face value of $416,000 and currently sells for 113 percent of face. The yield to maturity on the debt is 8.20 percent. What is the firm's weighted average cost of capital if the tax rate is 40 percent?
Finance Question
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Dani Corporation has 7 million shares of common stock outstanding. The current share price is $79, and the book value per share is $10. The company also has two bond Issues outstanding. The first bond issue has a face value of $120 million, a coupon rate of 4 percent, and sells for 92 percent of par. The second issue has a face value of $105 million, a coupon rate of 3 percent, and sells for 104 percent of par. The first issue matures In 22 years, the second in 7 years. Suppose the most recent dividend was $4.75 and the dividend growth rate is 5.2 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. The tax rate Iis 25 percent. What is the company's WACC? (Do not round Intermedlate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC %

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