What rate should firm use to discount project cash flows

Assignment Help Financial Management

Reference no: EM131911024

Titan Mining Corporation has 9 million shares of common stock outstanding and 340,000 6 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $38 per share and has a beta of 1.5, and the bonds have 20 years to maturity and sell for 119 percent of par. The market risk premium is 7.8 percent, T-bills are yielding 3 percent, and the company’s tax rate is 36 percent. a. What is the firm's market value capital structure? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) Weight Debt 0.5419 Equity 0.4581 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? (I need helpf with b.)

Reference no: EM131911024

Questions Cloud

Prepare a spreadsheet with common size balance sheets : Prepare a spreadsheet with common size balance sheets for the years ended December 31, 2016 and December 31, 2017. For 2017, each line item should be shown

What is the total cash cost for establishing this position : What is the total cash cost for establishing this position? Would you recommend this position to the investor?

Explain what interventions can be use to improve the problem : Explain What interventions can be used to improve the problem? What resources are available? What are the associated costs? Is this idea sustainable?

What are issues that prompted a need for health care reform : What are the issues that prompted a need for health care reform? Support your answer with a credible data reference. Do not use a reference already used.

What rate should firm use to discount project cash flows : what rate should the firm use to discount the project's cash flows?

Informational efficiency of the market for stocks of firm : What does this behavior imply about the informational efficiency of the market for the stocks of Firm A and Firm B?

How long will it be until the account balance : A personal account earmarked as a retirement supplement contains $242,100. How long will it be until the account balance is $0?

Unethical to avoid paying one debts by going into bankruptcy : Is it unethical to avoid paying one’s debts by going into bankruptcy? Does a person have a moral responsibility to pay his or her debts?

What is your after-tax cost of money : What is your after-tax “cost of money” (taking into account that the interest payments on the bonds are tax-deductible)

User Account

All Pages