Titan Mining Corporation has 8 million shares of common stock outstanding, .5 million shares of 6 percent
Question:
Titan Mining Corporation has 8 million shares of common stock outstanding, .5 million shares of 6 percent preferred stock outstanding, and 100,000 9 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $32 per share and has a beta of 1.15, the preferred stock currently sells for $67 per share, and the bonds have 15 years to maturity and sell for 91 percent of par. The market risk premium is 10 percent, T-bills are yielding 5 percent, and Titan Mining’s tax rate is 35 percent.
a. What is the firm’s market value capital structure?
b. If Titan Mining is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should the firm use to discount the project’s cash flows?
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9780072553079
6th Edition
Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan