Question

What is the firms market capital structure and WACC?

Titan Mining Corporation has 8.5 million shares of common stock outstanding, 250,000 shares of 5 percent preferred stock outstanding, and 135,000 7.5 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $34 per share and has a beta of 1.25, the preferred stock currently sells for $91 per share, and the bonds have 15 years to maturity and sell for 114 percent of par. The market risk premium is 7.5 percent, T-bills are yielding 4 percent, and Titan Mining's tax rate is 35 percent.

Answer 1

E 4% 7.50% 1.25 13.375% 8,500,000 $34 289,000,000 $ A 1 Bonds: 2 Par Value 3 Coupon Rate 4 Years to Maturity 5 Current Value 6 Frequency 7 Yield to Maturity (pretax cost of debt) 8 Tax Rate 9 After tax cost of debt 10 Number of Bonds 11 Total Market Value 12 13 Preferred Stock: 14 Par Value 15 Dividend 16 Current value 17 Cost of preferred stock 18 Number of preferred stock 19 Total Market value 20 21 B D Common Stock: $1,000 Risk free rate 7.50% Market risk premium 15 Beta $1,140 Cost of Equity 2 semi-annual Number of common stock 6.07% Current price 35% Total Market Value 3.94% 135,000 Weight of: 153,900,000 Debt Preferred Stock Common Stock $100 $5 WACC: $91 5.49% 250,000 22,750,000 $ 33.05% 4.89% 62.06% 9.87% $

B с D E 1000 0.04 0.075 0.075 15 Common Stock: Risk free rate Market risk premium Beta Cost of Equity Number of common stock Current price Total Market Value semi-annual A 1 Bonds: 2 Par Value 3 Coupon Rate 4 Years to Maturity 5 Current Value 6 Frequency 7 Yield to Maturity (pretax cost of debt) 8 Tax Rate 9 After tax cost of debt 10 Number of Bonds 11 Total Market Value 12 13 Preferred Stock: 14 Par Value 15 Dividend 16 Current value 17 Cost of preferred stock 18 Number of preferred stock 19 Total Market value 1.25 =E2+(E3*E4) 8500000 34 =E6* E7 =B2*114% 2 =B6*RATE(B4*B6,B3*B2/B6,-B5,B2) 0.35 =B7*(1-B8) 135000 =B10*B5 Weight of: Debt Preferred Stock Common Stock =B11/SUM($B$11,$B$19,$E$8) =B19/SUM($B$11,$B$19,$E$8) =E8/SUM($B$11,$B$19,$E$8) WACC: =(E11*89)+(E12*B17)+(E13*E5) 100 =B14*5% 91 =B15/B16 250000 =B18*B16 20 21 22 23