Titan Mining Corporation has 6.8 million shares of common stock outstanding, 245,000 shares of 4.1 percent...

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Titan Mining Corporation has 6.8 million shares of common stockoutstanding, 245,000 shares of 4.1 percent preferred stockoutstanding, and 130,000 bonds with a semiannual coupon rate of 5.8percent outstanding, par value $1,000 each. The common stockcurrently sells for $68 per share and has a beta of 1.20, thepreferred stock has a par value of $100 and currently sells for $88per share, and the bonds have 17 years to maturity and sell for 106percent of par. The market risk premium is 7.6 percent, T-bills areyielding 3.6 percent, and the company’s tax rate is 23 percent.
a.
What is the firm’s market value capital structure? (Donot round intermediate calculations and round your answers to 4decimal places, e.g., .1616.)
b. If the company is evaluating a new investment project that hasthe same risk as the firm’s typical project, what rate should thefirm use to discount the project’s cash flows? (Do notround intermediate calculations enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)

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4.4 Ratings (993 Votes)

a Market Value of preferred Stock 88 245000 21560000 Market Value of Bond 130000106 13780000 Market Value of Equity 680000068 462400000 Total Market Value See Answer

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Titan Mining Corporation has 6.8 million shares of common stockoutstanding, 245,000 shares of 4.1 percent preferred stockoutstanding, and 130,000 bonds with a semiannual coupon rate of 5.8percent outstanding, par value $1,000 each. The common stockcurrently sells for $68 per share and has a beta of 1.20, thepreferred stock has a par value of $100 and currently sells for $88per share, and the bonds have 17 years to maturity and sell for 106percent of par. The market risk premium is 7.6 percent, T-bills areyielding 3.6 percent, and the company’s tax rate is 23 percent.a.What is the firm’s market value capital structure? (Donot round intermediate calculations and round your answers to 4decimal places, e.g., .1616.)b.If the company is evaluating a new investment project that hasthe same risk as the firm’s typical project, what rate should thefirm use to discount the project’s cash flows? (Do notround intermediate calculations enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)

a.	What is the firm’s market value capital structure? (Donot round intermediate calculations and round your answers to 4decimal places, e.g., .1616.)
b.	If the company is evaluating a new investment project that hasthe same risk as the firm’s typical project, what rate should thefirm use to discount the project’s cash flows? (Do notround intermediate calculations enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)