Firm market value capital structure

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Titan Mining Corporation has 10.0 million shares of common stock outstanding, 440,000 shares of 4 percent preferred stock outstanding, and 230,000 8.8 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $48 per share and has a beta of 1.50, the preferred stock currently sells for $98 per share, and the bonds have 10 years to maturity and sell for 115 percent of par. The market risk premium is 8.8 percent, T-bills are yielding 5 percent, and Titan Mining's tax rate is 40 percent.

a. What is the firm's market value capital structure? (Round your answers to 4 decimal places. (e.g., 32.1616))

  • Market value
  • Debt
  • Preferred stock
  • Equity

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? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Discount rate %

Reference no: EM13926489

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