Titan Mining Corporation has 9.8 million shares of common stock outstanding and $420,000 5.2% semiannual bonds...

Titan Mining Corporation has 9.8 million shares of common stock outstanding and $420,000 5.2% semiannual bonds outstanding, par value $1000 each. The common stock currently sells for $46 per share and has a beta of 1.3; the bonds have 15 years to maturity and sell for 117 percent of par. The market risk premium is 8.6%, T-bills are yielding 4%, and the company's tax rate is 23%.

a. What is the firm's market value capital structure (debt and equity)?

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?

Expert Solution

Calculation for market value and discount rate is shown below

Following shows the working

jeff jeffy answered 2 weeks ago

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