FIN 571 Week 4 DQ 1 ( UOP Course ) For more course tutorials visit www . tutorialrank . com Tutorial Purchased : 1 Times , Rating : B +
FIN 571 Week 4 DQ 2 ( UOP Course )
13 . Titan Mining Corporation has 8.9 million shares of common stock outstanding and 330,000 5 percent semiannual bonds outstanding , par value $ 1,000 each . The common stock currently sells for $ 37 per share and has a beta of 1.45 , and the bonds have 15 years to maturity and sell for 118 percent of par . The market risk premium is 7.7 percent , T-bills are yielding 4 percent , and the company ’ s tax rate is 40 percent .
a . What is the firm ' s market value capital structure ?
b . If the company 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 ?
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FIN 571 Week 4 DQ 1 ( UOP Course ) For more course tutorials visit www . tutorialrank . com Tutorial Purchased : 1 Times , Rating : B +
A firm uses a single discount rate to compute the NPV of all its potential capital budgeting projects , even though the projects have a wide range of nondiversifiable risk . The firm then undertakes all those projects that appear to have positive NPVs . Briefly explain why such a firm would tend to become riskier over time .
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FIN 571 Week 4 DQ 2 ( UOP Course )