5.3.b - finding the WACC: Titan Mining Corporation is financed with half equity and half debt....

5.3.b - finding the WACC: Titan Mining Corporation is financed with half equity and half debt. Their financial structure includes 9.3 million shares of common stock trading at $34 per share with a ? of 1.20. Their debt is composed of 6.8 percent coupon bonds maturing in 20 years and selling for 104 percent of par. They pay a tax rate of 35 percent. Return on the market portfolio is 10.5 percent and return on the risk-free investment is 3.5 percent. If Titan Mining is evaluating a new investment project with the same business risk and the same financial risk as that of their typical projects, what weighted average cost of capital should the firm use to discount the project's cash flows? 8.04 percent 8.16 percent None of these values are correct. 8.34 percent

Expert Solution

SEE THE IMAGES

THIS SUM HAS BEEN CHANGED MANY A TIMES. THIS IS MODIFIED SUM AND NOT THE ORIGINAL ONE FROM BOOK.

THE NUMBER OF BONDS ARE NOT GIVEN. SO WE HAVE TO TAKE DEBT & EQUITY ON BOOK VALUE BASIS, 50%-50%

GO THROUGH IT. ANY DOUBTS FEEL FREE TO ASK. HAPPY TO HELP YOU

jeff jeffy answered 2 years ago

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