Titan Mining Corporation has 8.8 million shares of common stock outstanding, 320

Question

Titan Mining Corporation has 8.8 million shares of common stock outstanding, 320,000 shares of 4 percent preferred stock outstanding, and 170,000 7.6 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $36 per share and has a beta of 1.40, the preferred stock currently sells for $86 per share, and the bonds have 10 years to maturity and sell for 117 percent of par. The market risk premium is 7.6 percent, T-bills are yielding 5 percent, and the company’s tax rate is 38 percent.

a. What is the firm’s market value capital structure?

Debt:

Preferred stock:

equity:

Explanation / Answer

Answer:(a)

Debt=170000*$1000*117%=198900000

Preferred stock=320000 shares*$86=27520,000

Equity=8800000*$36=316800000

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