Titan Mining Corporation has 7.3 million shares of common stock outstanding, 265,000 shares of 4.5 percent...

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Titan Mining Corporation has 7.3 million shares of common stockoutstanding, 265,000 shares of 4.5 percent preferred stockoutstanding, and 150,000 bonds with a semiannual coupon rate of 5.4percent outstanding, par value $2,000 each. The common stockcurrently sells for $64 per share and has a beta of 1.20, thepreferred stock has a par value of $100 and currently sells for $92per share, and the bonds have 16 years to maturity and sell for 106percent of par. The market risk premium is 7.4 percent, T-bills areyielding 3.2 percent, and the company’s tax rate is 22 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.)

Debt:
Preferred stock:
Equity:
Discount rate:

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3.6 Ratings (552 Votes)

a MV of equityPrice of equitynumber of shares outstanding MV of equity647300000 467200000 MV of BondPar valuebonds outstandingage of par MV of Bond2000150000106 318000000 MV of Preferred equityPricenumber of shares outstanding MV of Preferred See Answer

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Titan Mining Corporation has 7.3 million shares of common stockoutstanding, 265,000 shares of 4.5 percent preferred stockoutstanding, and 150,000 bonds with a semiannual coupon rate of 5.4percent outstanding, par value $2,000 each. The common stockcurrently sells for $64 per share and has a beta of 1.20, thepreferred stock has a par value of $100 and currently sells for $92per share, and the bonds have 16 years to maturity and sell for 106percent of par. The market risk premium is 7.4 percent, T-bills areyielding 3.2 percent, and the company’s tax rate is 22 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.) Debt:Preferred stock:Equity:Discount rate:

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.)