Titan Mining Corporation has 8.3 million shares of common stock outstanding, 305,000 shares of 3.9 percent preferred stock outstanding, and 190,000 bonds with a semlannual coupon rate of 5.2 percent outstanding, par value $2,000 each. The common stock currently sells for $56 per share and has a beta of 1.20, the preferred stock has a par value of $100 and currently sells for $100 per share, and the bonds have 19 years to maturity and sell for 108 percent of par. The market risk premlum Is 6.8 percent, T-bills are yielding 3.2 percent, and the company's tax rate Is 25 percent. a. What is the firm's market value capital structure? (Do not round Intermedlate calculations and round your answers to 4 declmal 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 Intermedlate calculatlons enter your answer as a percent rounded to 2 decimal places, e.g.., 32.16.) a. Debt Preferred stock Equity b. Discount rate
Titan Mining Corporation has 8.3 million shares of common stock outstanding, 305,000 shares of 3.9 percent preferred stock outstanding, and 190,000 bonds with a semlannual coupon rate of 5.2 percent outstanding, par value $2,000 each. The common stock currently sells for $56 per share and has a beta of 1.20, the preferred stock has a par value of $100 and currently sells for $100 per share, and the bonds have 19 years to maturity and sell for 108 percent of par. The market risk premlum Is 6.8 percent, T-bills are yielding 3.2 percent, and the company's tax rate Is 25 percent. a. What is the firm's market value capital structure? (Do not round Intermedlate calculations and round your answers to 4 declmal 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 Intermedlate calculatlons enter your answer as a percent rounded to 2 decimal places, e.g.., 32.16.) a. Debt Preferred stock Equity b. 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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Transcribed Image Text:Titan Mining Corporation has 8.3 million shares of common stock outstanding, 305,000
shares of 3.9 percent preferred stock outstanding, and 190,000 bonds with a semlannual
coupon rate of 5.2 percent outstanding, par value $2,000 each. The common stock
currently sells for $56 per share and has a beta of 1.20, the preferred stock has a par
value of $100 and currently sells for $100 per share, and the bonds have 19 years to
maturity and sell for 108 percent of par. The market risk premium is 6.8 percent, T-bills
are yielding 3.2 percent, and the company's tax rate Is 25 percent.
a. What Is the firm's market value capital structure? (Do not round Intermedlate
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 Intermedlate calculations enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
a.
Debt
Preferred stock
Equity
b.
Discount rate
%
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