Titan Mining Corporation has 10 million shares of common stock outstanding, 440,

Question

Titan Mining Corporation has 10 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 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.) Market value weight Debt Preferred stock Equity 3655 .0510 5835

Explanation / Answer

Calculation of Firm's Market Value Capital Structure Type of Capital Calculation Market Value Market Value Weight Equity =10*1000000*$48 $480,000,000 0.6094 Preferred stock =440000*$98 $43,120,000 0.0547 Debt =230000*$1000*115% $264,500,000 0.3358 $787,620,000

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