hmk5 - Last Assignment There are 4 problems due Thursday...

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Last Assignment ( There are 4 problems – due: Thursday, April 28 ) 1. Titan Mining Corporation has 15 million shares of common stock outstanding , and 200 , 000 of 8 . 4 percent semi-annual coupon , $ 1 , 000 par value bonds outstanding . The common stock currently sells for $ 40 per share and has a beta of 1 . 30 , and the bonds have 20 years to maturity and sell for 90 percent of par . The market risk premium is 7 percent , T-bills are yielding 2 percent , and Titan Mining s tax rate is 35 percent . (a) What is the firm s market value capital structure ? (b) If Titan Mining 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 ? 2. Locomotive Corporation is planning to repurchase part of its common stock by issuing corporate debt . As a result , the firm s debt - equity ratio is expected to rise from 40 percent to 50 percent . The firm currently has $ 8 million worth of debt outstanding
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This note was uploaded on 05/23/2011 for the course ECON 402 taught by Professor Kanner during the Spring '11 term at DePaul.

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hmk5 - Last Assignment There are 4 problems due Thursday...

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