Titan Mining Corporation has 9.9 million shares of common stock outstanding, 430

Question

Titan Mining Corporation has 9.9 million shares of common stock outstanding, 430,000 shares of 6 percent preferred stock outstanding, and 225,000 8.7 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $47 per share and has a beta of 1.45, the preferred stock currently sells for $97 per share, and the bonds have 20 years to maturity and sell for 118 percent of par. The market risk premium is 8.7 percent, T-bills are yielding 5 percent, and the company’s tax rate is 40 percent.

a. What is the firm’s market value capital structure? (Do not round intermediate calculations. Round your answers to 4 decimal places, e.g., 32.1616.)

Debt ?

Preferred stock ?

Equity ?

Explanation / Answer

Market value of debt = ($1,000 x 118%) x 225,000 = $265,500,000
Market value of preferred stock = $97 x 430,000 = $41,710,000
Market value of equity = $47 x 9,900,000 = $465,300,000

Market value of capital = $265,500,000 + $41,710,000 + $465,300,000 = $772,510,000

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