Raymond Mining Corporation has 8.6 million shares of common stock outstanding, 300,000 shares of 5% $100 par value preferred stock outstanding, and 145,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $34 per share and has a beta of 1.30, the preferred stock currently sells for $96 per share, and the bonds have 15 years to maturity and sell for 115% of par. The market risk premium is 7.4%, T-bills are yielding 3%, and Raymond Mining's tax rate is 40% a. What is the firm's market value capital structure? (Enter your answers in whole dollars.) Debt Equity Preferred stock Market value $ $ S 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 rate

Raymond Mining Corporation has 8.6 million shares of common stock outstanding, 300,000 shares of 5% $100 par value preferred stock outstanding, and 145,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $34 per share and has a beta of 1.30, the preferred stock currently sells for $96 per share, and the bonds have 15 years to maturity and sell for 115% of par. The market risk premium is 7.4%, T-bills are yielding 3%, and Raymond Mining's tax rate is 40% a. What is the firm's market value capital structure? (Enter your answers in whole dollars.) Debt Equity Preferred stock Market value $ $ S 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 rate

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 14P

See similar textbooks

Similar questions

Hankins Corp has 5.4 million shares of common stock outstanding; 290,000 shares of 5.2% preferred stock outstanding, with a par value of $100; and 125,000, 5.7 semiannual bonds outstanding with a par value 1000 each. The common stock currently sells for $72 per share and has a beta of 1.13, The preferred stock currently sells for $103 per share, and the bonds have a 20 year to maturity and self worth. 103 percent of par. The market risk premium is 6.8%, T-bills are yielding 4.3%, and the firm's tax rate is 23%. A.What is the firm's market capital structure? B. If the firm is evaluating a new investment project that has the same risk, as the firm's typical project, what rate should the firm used to discount the project's cash flow? pls type in computer. Thanks!
JS Corporation has 9 million shares of common stock outstanding, 250,000 shares of RM6 annual dividend preferred stock outstanding, and 105,000 of 7.5% semi-annual bond outstanding. The common stock is currently sells for RM34 per share and has a beta of 1.25, the preferred stock currently sells for RM91 per share, and the bonds have 15 years to maturity and sell for 93% of par. The market risk premium is 8.5%, T-bills are yielding 5%, and corporate tax rate is 35%. Calculate the cost of debt and Weighted Average Cost of Capital (WACC).
Titan Mining Corporation has 14 million shares of common stock outstanding, 900,000 shares of 9 percent preferred stock outstanding and 220,000 ten percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $42 per share and has a beta of 1.15, the preferred stock currently sells for $80 per share, and the bonds have 17 years to maturity and sell for 91 percent of par. The market risk premium is 11.5 percent, T-bills are yielding 7.5 percent, and the firm's tax rate is 32 percent. What discount rate should the firm apply to a new project's cash flows if the project has the same risk as the firm's typical project?
Ahmed Company has 8.5 million shares of common stock outstanding, 250,000 shares of 5 percentpreferred stock outstanding, and 135,000 7.5 percent semiannual bonds outstanding, par value $5,000each. The common stock currently sells for $34 per share (Par value= $10) and has a beta of 1.25, thepreferred stock currently sells for $91 per share, and the bonds have 15 years to maturity and sell for114 percent of par. The market risk premium is 7.5 percent, T-bills are yielding 4 percent, and AhmedCompany tax rate is 36 percent.a. What is the firm’s market value capital structure?b. If Ahmed Company is evaluating a new investment project that has the same risk as the firm’s typicalproject, what rate should the firm use to discount the project’s cash flows? If we use debt 35%, preferredstock 15% and common stock 50%, what will be the discount rate by assuming same cost of eachfinancing?
Titan Mining Corporation has 7.5 milion shares of common stock outstanding, 250,000 shares of 4.2 percent preferred stock outstanding, and 140,000 bonds with a semiannual coupon of 5.1 percent outstanding, par value $1,000 each. The common stock currently sells for $51 per share and has a beta of 1.15, the preferred stock currently sells for $103 per share, and the bonds have 15 years to maturity and sell for 107 percent of par. The market risk premium is 7.5 percent, T-bills are yielding 2.4 percent, and the company's tax rate is 22 percent. a. What is the firm's market value capital structure? b. If the company 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?
Bombay Inc has 8.5 million shares of common stock outstanding, 250,000shares of 5% preferred stock outstanding, and 135,000 7.5% semi-annualbonds outstanding, par value $1000 EACH. The common stock currently sellsfor $34 per share and has a beta of 1.25, the preferred stock currently sells for$91 per share, and the bonds have 15 years to maturity and sell for 114% ofpar. The market risk premium is 7.5%, T-bills are yielding 4%, and thecompany’s tax rate is 35%.a) Calculate the firm’s market value capital structure.b) Calculate the company WACCc) If Bombay Inc generates a 7.5% with this capital, is Bombay Incdestroying or adding value discuss.
Titan Mining Corporation has 15 million shares of common stock outstanding, 1,000,000 shares of 10 percent preferred stock outstanding. Titan Mining also has 220,000 bonds outstanding with par value $1,000 each and the bonds have 18 years to maturity. The bond currently sell for 90 percent of par and has cost of debt before-tax of 12 percent. The common stock currently sells for $35 per share and has a beta of 1.25, the preferred stock currently sells for $90 per share,. The market risk premium is 12 percent, T-bills are yielding 7 percent, and the firm's tax rate is 34 percent. What is the corporation weighted average cost of capital?
Ahmed Company has 8.5 million shares of common stock outstanding, 250,000 shares of 5 percent preferred stock outstanding, and 135,000 7.5 percent semiannual bonds outstanding, par value $5,000 each. The common stock currently sells for $34 per share (Par value= $10) and has a beta of 1.25, the preferred stock currently sells for $91 per share, and the bonds have 15 years to maturity and sell for 114 percent of par. The market risk premium is 7.5 percent, T-bills are yielding 4 percent, and Ahmed Company tax rate is 36 percent. a. What is the firm's market value capital structure? b. If Ahmed Company 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? If we use debt 35%, preferred stock 15% and common stock 50%, what will be the discount rate by assuming same cost of each financing?
Hankins Corporation has 8.9 million shares of common stock outstanding, 640,000 shares of 7.4 percent preferred stock outstanding, and 189,000 of 8.6 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $65.40 per share and has a beta of 1.34, the preferred stock currently sells for $106.60 per share, and the bonds have 13 years to maturity and sell for 89 percent of par. The market risk premium is 7 percent, T-bills are yielding 5.7 percent, and the firm’s tax rate is 35 percent. If the firm 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
Deep Mines has 14 million shares of common stock outstanding with a beta of 1.15 and a market price of $42 a share. There are 900,000 shares of 9% preferred stock outstanding valued at $80 a share. The 10% semiannual bonds have a face value of $1,000 and are selling at 91% of par. There are 220,000 bonds outstanding that mature in 17 years. The market risk premium is 11.5%, T-bills are yielding 7.5%, and the firm's tax rate is 32%. What rate should the firm apply to project cash flows if the risk is the same as the firm's in decimal form (round to the nearest thousandth)?
True or False. A company borrows additional financing and as a result their weight of debt increases (holding dollars of equity constant). Because the weight of debt increases, the company's WACC will always decrease. True O False
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%. 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?