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Raymond Mining Corporation has 9.4 million shares of common stock outstanding, 380,000 shares of 4% $100 par value preferred stock outstanding, and 161,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $42 per share and has a beta of 1.20, the preferred stock currently sells for $91 per share, and the bonds have 10 years to maturity and sell for 113% of par. The market risk premium is 8.2%, T-bills are yielding 3%, and Raymond Mining's tax rate is 35%. a. What is the firm's market value capital structure? (Enter your answers in whole dollars.) Debt Equity Preferred stock Market value $ $ $ b. If Raymond 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? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 3 decimal places.) Discount rate %

Raymond Mining Corporation has 9.4 million shares of common stock outstanding, 380,000 shares of 4% $100 par value preferred stock outstanding, and 161,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $42 per share and has a beta of 1.20, the preferred stock currently sells for $91 per share, and the bonds have 10 years to maturity and sell for 113% of par. The market risk premium is 8.2%, T-bills are yielding 3%, and Raymond Mining's tax rate is 35%. a. What is the firm's market value capital structure? (Enter your answers in whole dollars.) Debt Equity Preferred stock Market value $ $ $ b. If Raymond 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? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 3 decimal places.) Discount rate %

Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
ChapterMB: Model-building Problems
Section: Chapter Questions
Problem 8M
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Raymond Mining Corporation has 9.4 million shares of common stock outstanding, 380,000 shares of 4% $100 par value preferred stock outstanding, and 161,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $42 per share and has a beta of 1.20, the preferred stock currently sells for $91 per share, and the bonds have 10 years to maturity and sell for 113% of par. The market risk premium is 8.2%, T-bills are yielding 3%, and Raymond Mining's tax rate is 35%. a. What is the firm's market value capital structure? (Enter your answers in whole dollars.) Market value $ Debt Equity Preferred stock LA S b. If Raymond 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? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 3 decimal places.) Discount rate %
Transcribed Image Text:Raymond Mining Corporation has 9.4 million shares of common stock outstanding, 380,000 shares of 4% $100 par value preferred stock outstanding, and 161,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $42 per share and has a beta of 1.20, the preferred stock currently sells for $91 per share, and the bonds have 10 years to maturity and sell for 113% of par. The market risk premium is 8.2%, T-bills are yielding 3%, and Raymond Mining's tax rate is 35%. a. What is the firm's market value capital structure? (Enter your answers in whole dollars.) Market value $ Debt Equity Preferred stock LA S b. If Raymond 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? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 3 decimal places.) Discount rate %
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