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colstate.view.usg.edu Quizzes- Managerial Enter your 67852741 ance X. As LILEO Locker Logged in as landers-ashleigh | 11/10/2017-rwHELP TATE Managerial Finance XLS Group B8 Fall Semester 2017 CO RSITY Discussions Assignments Quizzes / Grades Groups El Rubrics Self Assessments Quiz 13- Cost of Capital- Quiz leigh Landers: Attempt 1 Titan Mining Corporation has 12 million shares of common stock outstanding, 740,000 shares of 6.5 percent preferred stock outstanding, and 200,000 7.5 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $33 per share and has a beta of 1.1, the preferred stock currently sells for $80 per share, and the bonds have 13 years to maturity and sell for 95 percent of par. The market risk premium is 9 percent, T-bills are yielding 4.5 percent, and Titan Mining's tax rate is 33 percent. The Market Value Weights of Debt and Equity ace____ and , respectively. The WACC is 11.19% 28.96%; 48.74% 029.45% 61.38% 029.45%; 63.56% 0 29.45%; 48.74% 28.96%; 63.56% Save Question 2 (10 points) The Down and Out Co. just issued a dividend of $2.60 per share on its common stock. The company is constant 4 percent growth rate in its dividends indefinitely. If the stock selils for s50 a share, the company's cost of equity expected to maintain is 11.82% 12.79%Explanation / Answer
Answer:
Value of Common Stock = 12,000,000 * $33
Value of Common Stock = $396,000,000
Value of Preferred Stock = 740,000 * $80
Value of Preferred Stock = $59,200,000
Value of Bonds = 200,000 * ($1,000 * 95%)
Value of Bonds = $190,000,000
Total Value of Titan Mining Corporation = $396,000,000 + $59,200,000 + $190,000,000
Total Value of Titan Mining Corporation = $645,200,000
Weight of Debt = 190,000,000 / 645,200,000
Weight of Debt = 29.45%
Weight of Equity = 396,000,000 / 645,200,000
Weight of Equity = 61.38%
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