Titan Mining Corporation has 10.0 million shares of common stock outstanding, 44
ID: 2646338 • Letter: T
Question
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
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
Explanation / Answer
a) Statement showing computation on the basis of Market Value Stock No of shares MV per share Market Value Weight Common Stock 10,000,000.00 48.00 480,000,000.00 0.6094 Preferred Stock 440,000.00 98.00 43,120,000.00 0.0547 Bonds 230,000.00 1,150.00 264,500,000.00 0.3358 787,620,000.00 1.0000 b) Stock Weight Cost Waighted Cost Common Stock 0.7500 8% 6.00% Preferred Stock 0.1500 4% 0.60% Bonds 0.1000 3.50% 0.35% 1.00 WACC 6.95%
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