Titan Mining Corporation has 15 million shares of common stock outstanding, 1,000,000shares of 10 percent preferred stock outstanding. Titan Mining also has 220,000 bondsoutstanding with par value $1,000 each and the bonds have 18 years to maturity. The bondcurrently sell for 90 percent of par and has cost of debt before-tax of 12 percent. Thecommon stock currently sells for $35 per share and has a beta of 1.25, the preferred stockcurrently sells for $90 per share,. The market risk premium is 12 percent, T-bills are yielding7 percent, and the firm's tax rate is 34 percent. What is the corporation weighted averagecost of capital?

Weighted Average cost of capital (WACC) :— It is the average cost of capital of the firm's existing…

Answered: Titan Mining Corporation has 15 million…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Lingenburger Cheese Corporation has 6.2 million shares of common stock outstanding, 316,000 shares of 4.55 percent preferred stock outstanding, par value of $100, and 69,000 5.6 percent semiannual bonds outstanding, par value $2,000 each. The common stock currently sells for $73.95 per share and has a beta of 1.16, the preferred stock currently sells for $101.20 per share, and the bonds have 21 years to maturity and sell for 95.7 percent of par. The market risk premium is 6.6 percent, T-bills are yielding 3.2 percent, and the firm's tax rate is 23 percent. 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. Market value weight of debt Market value weight of preferred stock Market value weight of equity What is the firm'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. Aftertax cost…
XRT Infrastructure Corp. has 80,000 bonds outstanding that are selling at 90% of the par value (Bonds are selling at discount). Bonds with similar characteristics are yielding 10.8%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $50 per share. The common shareholder anticipates receiving a dividend that will growth at 0%, based on the fact they received $5 dividend last year. The capital market analysts predict that dividends will continue to grow at the same rate into the foreseeable future. The firm’s tax rate is 28 percent. What would be your estimate of the cost of common stock (cost of equity)? What would be the estimate cost of capital (WACC)?
True or False. A company borrows additional financing and as a result their weight of debt increases (holding dollars of equity constant). Because the weight of debt increases, the company's WACC will always decrease. True O False
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.
Titan Mining Corporation has 6.3 million shares of common stock outstanding, 220,000 shares of 3.6 percent preferred stock outstanding, 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 1.15, 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? (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…
Manshuk
Suppose Westerfield Co. has the following financial information: Debt: 900, 000 bonds outstanding with a face value of $1,000. The bonds currently trade at 85% of par and have 12 years to maturity. The coupon rate equals 7%, and the bonds make semiannual interest payments. Preferred stock: 600,000 shares of preferred stock outstanding; currently trading for $108 per share, paying a dividend of $9 annually. Common stock: 25,000,000 shares of common stock outstanding; currently trading for $185 per share. Beta equals 1.22. Market and firm information: The expected return on the market is 9%, the risk - free rate is 5%, and the tax rate is 21 %. Calculate the weight of debt in the capital structure. (Enter percentages as decimals and round to 4 decimals)
Filer Manufacturing has 5,766,872 shares of common stock outstanding. The current share price is $36.05, and the book value per share is $7.08. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $64,298,817, has a 0.05 coupon, matures in 10 years and sells for 83 percent of par. The second issue has a face value of $48,100,600, has a 0.06 coupon, matures in 20 years, and sells for 92 percent of par. The most recent dividend was $2.78 and the dividend growth rate is 0.05. 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 0.35. What is Filer's aftertax cost of debt? Enter the answer with 4 decimals (e.g. 0.2345)
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 rate.
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.…
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…
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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