Titan Mining Corporation has 8 million shares of common stock outstanding, 5 million shares of preferred...

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Finance

Titan Mining Corporation has 8 million shares of common stockoutstanding, 5 million shares of preferred stock outstanding, and100,000 units of 9 percent semiannual bonds outstanding, par value$1,000 each. The preferred stock pays a dividend of $6 per share.The common stock currently sells for $32 per share and has a betaof 1.15, the preferred stock currently sells for $67 per share, andthe bonds have 15 years to maturity and sell for 91 percent of par.The market risk premium is 10 percent, T-bills are yielding 5percent, and Titan Mining’s tax rate is 35 percent.
What is the firm’s market value capital structure?
If Titan Mining 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?
Takelmer Industries has a different WACC for each of threetypes of projects. Low-risk projects have an 8% WACC, average-riskprojects a 10% WACC, and high-risk projects a 12% WACC. Which ofthe following projects do you recommend that the firm accept?
Project
Level of Risk
IRR
A
Low
9.50%
B
Average
8.50%
C
Average
7.50%
D
Low
9.50%
E
High
14.50%
F
High
17.50%
G
Average
11.50%
A, B, C, D, and G
B, C, E, F, and G
A, D, E, F, and G
A, B, C, D, E, F, and G

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4.4 Ratings (703 Votes)

a Market Value of Preferred Stock Price of Preferred StockNumber of preferred stocks 675000000335000000 Market Value of Equity Price of EquityNumber of stocks 328000000256000000 Market See Answer

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Project	Level of Risk	IRR
A	Low	9.50%
B	Average	8.50%
C	Average	7.50%
D	Low	9.50%
E	High	14.50%
F	High	17.50%
G	Average	11.50%