Titan Mining Corporation has 8.6 million shares of common stock outstanding and 300,000 5 percent semiannual...

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Titan Mining Corporation has 8.6 million shares of common stockoutstanding and 300,000 5 percent semiannual bonds outstanding, parvalue $1,000 each. The common stock currently sells for $34 pershare and has a beta of 1.3, and the bonds have 15 years tomaturity and sell for 115 percent of par. The market risk premiumis 7.4 percent, T-bills are yielding 3 percent, and the company’stax rate is 40 percent.

a.
What is the firm's market value capital structure? (Donot round intermediate calculations and round your answers to 4decimal places, e.g., 32.1616.)
Weight
  Debt
  Equity

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 and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)
  Discount rate %

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3.8 Ratings (412 Votes)

a MV of equityPrice of equitynumber of shares outstanding MV of equity348600000 292400000 MV of BondPar valuebonds outstandingage of par MV of Bond1000300000115 See Answer

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Titan Mining Corporation has 8.6 million shares of common stockoutstanding and 300,000 5 percent semiannual bonds outstanding, parvalue $1,000 each. The common stock currently sells for $34 pershare and has a beta of 1.3, and the bonds have 15 years tomaturity and sell for 115 percent of par. The market risk premiumis 7.4 percent, T-bills are yielding 3 percent, and the company’stax rate is 40 percent. a.What is the firm's market value capital structure? (Donot round intermediate calculations and round your answers to 4decimal places, e.g., 32.1616.)Weight Debt Equity 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 and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.) Discount rate%