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Titan Mining Corporation has 7.2 million shares of common stock outstanding, 260,000 shares of 4.4 percent...

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Finance

Titan Mining Corporation has 7.2 million shares ofcommon stock outstanding, 260,000 shares of 4.4 percent preferredstock outstanding, par value $2,000 each. The common stockcurrently sells for $65 per share and has a beta of 1.15, thepreferred stock has a par value of $100 and currently sells for $91per share, and the bonds have 15 years to maturity and sells 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 21percent.

a. what is the firm's market value capitalstructure?

b. If the company is evaluating a new investmentproject that has the same risk as the firm's typical project, whatrate should the firm use to discount the project's cash flows?

Answer & Explanation Solved by verified expert
4.5 Ratings (706 Votes)
Requirement a Firms Market Value Capital Structure Capital Components Calculation Market Value Capital Structure Weights Debt 304500000 796160000 03825 Preferred Stock 23660000 796160000 00297 Equity 468000000 796160000 05878 Calculations Market Value of Debt 304500000 145000 Bonds x 2000 x 105 Market Value of Preferred Stock 23660000 260000 Shares x 91 per share Market Value of    See Answer
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Titan Mining Corporation has 7.2 million shares ofcommon stock outstanding, 260,000 shares of 4.4 percent preferredstock outstanding, par value $2,000 each. The common stockcurrently sells for $65 per share and has a beta of 1.15, thepreferred stock has a par value of $100 and currently sells for $91per share, and the bonds have 15 years to maturity and sells 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 21percent.a. what is the firm's market value capitalstructure?b. If the company is evaluating a new investmentproject that has the same risk as the firm's typical project, whatrate should the firm use to discount the project's cash flows?

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