Reymond Mining Corporation has 9.8 million shares of common stock outstanding, 420,000 shares of 5% $100 par value preferred stock outstanding, and 169,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $46 per share and has a beta of 1.40, the preferred stock currently sells for $95 per share, and the bonds have 15 years to maturity and sell for 117% of par. The market risk premium is 8.6%, T-bills are yielding 4%, and Raymond Mining's tax rate is 40% a. What is the firm's market value capital structure? (Enter your answers in whole dollars.) Market value Debt Equity Preferred stock 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
Reymond Mining Corporation has 9.8 million shares of common stock outstanding, 420,000 shares of 5% $100 par value preferred stock outstanding, and 169,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $46 per share and has a beta of 1.40, the preferred stock currently sells for $95 per share, and the bonds have 15 years to maturity and sell for 117% of par. The market risk premium is 8.6%, T-bills are yielding 4%, and Raymond Mining's tax rate is 40% a. What is the firm's market value capital structure? (Enter your answers in whole dollars.) Market value Debt Equity Preferred stock 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
Chapter20: Financing With Derivatives
Section: Chapter Questions
Problem 17P
Related questions
Question
![Debt
Equity
Preferred stock
Ĵ
Raymond Mining Corporation has 9.8 million shares of common stock outstanding, 420,000 shares of 5% $100 par value preferred
stock outstanding, and 169,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for
$46 per share and has a beta of 1.40, the preferred stock currently sells for $95 per share, and the bonds have 15 years to maturity
and sell for 117% of par. The market risk premium is 8.6 %, T-bills are yielding 4%, and Raymond Mining's tax rate is 40%.
a. What is the firm's market value capital structure? (Enter your answers in whole dollers.)
Market value
S
S
5
c
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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa86264da-a727-482b-ab41-a188577ab5d4%2Fc6ba2898-c6bc-4610-a841-94dde8702871%2Farsr87g_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Debt
Equity
Preferred stock
Ĵ
Raymond Mining Corporation has 9.8 million shares of common stock outstanding, 420,000 shares of 5% $100 par value preferred
stock outstanding, and 169,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for
$46 per share and has a beta of 1.40, the preferred stock currently sells for $95 per share, and the bonds have 15 years to maturity
and sell for 117% of par. The market risk premium is 8.6 %, T-bills are yielding 4%, and Raymond Mining's tax rate is 40%.
a. What is the firm's market value capital structure? (Enter your answers in whole dollers.)
Market value
S
S
5
c
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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