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)