a. What is the firm's market value capital structure? (Enter your answers in whole dollars.) Market value $ $ $ Debt Equity Preferred stock b. If Raymond 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. Enter your answer as a percentage rounded to 3 decimal places.) % Discount

a. What is the firm's market value capital structure? (Enter your answers in whole dollars.) Market value $ $ $ Debt Equity Preferred stock b. If Raymond 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. Enter your answer as a percentage rounded to 3 decimal places.) % Discount

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 14P

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Titan Mining Corporation has 9 million shares of common stock outstanding, 250,000 shares of preferred stock with 6% return, and 105,000 7.5% semiannual bonds outstanding. The common stock currently sells for $34 per share and has a beta of 1.25, the preferred stock currently sells for $91 per share, and bonds have 15 years to maturity and sell for $930. The market risk premium is 8.5%, T-bills are yielding 5%, and Titan Mining’s tax rate is 35%. The firm is considering acquiring a new machine that costs $100,000 and the expected cash flows are $31,000 per year for the next 4 years. Based on the IRR, should you accept or reject the project?