Titan Mining Corporation has 9 million shares of common share outstanding and 120,000 semiannual bonds outstanding, par value $1,000 each. The coupon rate on bonds is 6%. The common stock currently sells for $34 per share and has a beta of 1.20, and the bonds have 30 years to maturity and sell for 93% of par. The market risk premium is 10%, T-Bills are yielding 5%, and Titan Mining’s tax rate is 35%. a. What are the weights based on market values?b. Compute the WACC?
Titan Mining Corporation has 9 million shares of common share outstanding and 120,000 semiannual bonds outstanding, par value $1,000 each. The coupon rate on bonds is 6%. The common stock currently sells for $34 per share and has a beta of 1.20, and the bonds have 30 years to maturity and sell for 93% of par. The market risk premium is 10%, T-Bills are yielding 5%, and Titan Mining’s tax rate is 35%. a. What are the weights based on market values?b. Compute the WACC?
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 15P
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Titan Mining Corporation has 9 million shares of common share outstanding and 120,000 semiannual bonds outstanding, par value $1,000 each. The coupon rate on bonds is 6%. The common stock currently sells for $34 per share and has a beta of 1.20, and the bonds have 30 years to maturity and sell for 93% of par. The market risk premium is 10%, T-Bills are yielding 5%, and Titan Mining’s tax rate is 35%.
a. What are the weights based on market values?
b. Compute the WACC?
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