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Titan Mining Corporation has 9.7 million shares of common stock outstanding, 410,000 shares of preferred stock...

Titan Mining Corporation has 9.7 million shares of common stock outstanding, 410,000 shares of preferred stock outstanding, and 215,000 bonds outstanding with a par value of $1,000 each. The common stock currently sells for $45 per share and has a beta of 1.35, the preferred stock currently sells for $95 per share, and the bonds sell for 116 percent of par. The cost of common equity is 16.48 percent, preferred equity is 4.21 percent, and the debt's yield to maturity is 6.32. The company’s marginal tax rate is 35 percent.

a. Use the market values to calculate the firm's capital structure weights. (Do not round intermediate calculations. Leave as a decimal and round your answers to 4 decimal places, e.g., 0.1616.)

Market value weight

Debt:

Preferred stock:

Equity:

Solutions

Expert Solution


Particulars

Price

Quantity

Price x Quantity

Market value Weight in decimal

Market value Weight in %

Working

Debt

$1,160.00

                 215,000

       249,400,000.00

                                              0.3441

34.4071%

=249400000/724850000

Preferred Share

$95.00

                 410,000

          38,950,000.00

                                              0.0537

5.3735%

=38950000/724850000

Equity

$45.00

              9,700,000

       436,500,000.00

                                              0.6022

60.2194%

=436500000/724850000

Total

       724,850,000.00

Note: “Working” column suggest how to calculate the weights.

jeff jeffy answered 1 year ago
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