Firm Market Value Capital Structure Assignment

Firm Market Value Capital Structure

Miller Manufacturing has a target debt-to-equity ratio of 0.60. Its cost of equity is 14 percent, and its cost of debt is 8 percent. If the tax rate is 38 percent, what is Miller’s WACC? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) WACC % 6.66 points
Raymond Mining Corporation has 9.3 million shares of common stock outstanding, 370,000 shares of 6% $100 par value preferred stock outstanding, and 159,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $41 per share and has a beta of 1.15, the preferred stock currently sells for $97 per share, and the bonds have 20 years to maturity and sell for 112% of par. The market risk premium is 8.1%, T-bills are yielding 4%, and Raymond Mining’s tax is 40%. -66 pints
a. What is the firm’s market value capital structure? eBook Market value Print Debt Equity Preferred stock References
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. Get Finance homework help today