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Finding the WACC [LO3] Titan Mining Corporation has 7.3 million shares of common stock outstanding, 220,000 shares of 4.5 percent preferred stock outstanding, and 120,000 6.5 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $46 per share and has a beta of .95, the preferred stock currently sells for $91 per share, and the bonds have 15 years to maturity and sell for 107 percent of par. The market risk premium is 7 percent, T-bills are yielding 3.6 percent, and the company’s tax rate is 35 percent.
What is the firm’s market value capital structure?
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?
In each of the following financial situations, fill in the blank with the terms high duration, low duration, or zero duration, as appropriate. a. If you were considering buying a bond and you expected interest rates to increase, you would prefer a bo..
Suppose your company imports computer motherboards from Singapore. The exchange rate is S$1.2348/US$. You have just placed an order for 34,000 motherboards at a cost to you of 142.9 Singapore dollars each. You will pay for the shipment when it arrive..
The growth rate for the firm's common stock is 7%. The firm's preferred stock is paying an annual dividend of $5. What is the preferred stock price if the required rate of return is 8%?
A stock has an expected return of 10 percent, a beta of 1.50, and the expected return on the market is 8 percent. What must the risk-free rate be?
Bart Simpson, age 10, wants to be able to buy a really cool new car when he turns 15. His really cool car costs $16,000 today, and its cost is expected to increase 3 percent annually. Bart wants to make one deposit today (he can sell his mint-conditi..
Suppose “s” (the fraction of your wealth put into stocks) is 0.8 and that stocks have a return of 25 percent. If the return on bonds is 3 percent, what is the return on your wealth?
Make a three year Pro Forma income statement for your organization (or product/service) and include information on your financial break-even point?
Marston Marble Corporation is considering a merger with the Conroy Concrete Company. Conroy is a publicly traded company, and its beta is 1.30. Conroy has been barely profitable, so it has paid an average of only 20% in taxes during the last several ..
If the interest rate is lower in the U.S. than in the United Kingdom, and if the forward rate of the British pound is the same as its spot rate:
A U.S. exporter owes £3,500,000 in six months and is planning to use an option market hedge. The contract sized for options on the British Pound is £100,000. The strike price is X($/£)=1.51 for both calls and puts. Show all the cash flows involved an..
A company is planning to invest 60,000 in a personnel training program. The 60,000 outlay will be charged off as an expense by the firm this year (year 0). Years 1-10: $10,000 per year. Years 11-20: $22,000 per year. The company has estimated its cos..
A property is expected to generate no net operating income for the next two years (t=1 and t=2) due to a higher level of operating expenses. In the third year (t=3), net operating income is expected to be $20,000 and in the fourth year (t=4) it is ex..
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