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12. Filer Manufacturing has 4 million shares of common stock outstanding. The current share price is $ 76, and the book value per share is $ 5. The company also has two bond issues outstanding. The first bond issue has a face value $ 90 million, a coupon of 5 percent, and sells for 94 percent of par. The second issue has a face value of $ 70 million, a coupon of 6 percent, and sells for 104 percent of par. The first issue matures in 20 years, the second in 3 years. a. What are the company ' s capital structure weights on a book value basis?( Do not round intermediate calculations and round your answers to b.

What are the company ' s capital structure weights on a market value basis?( Do not round intermediate calculations and round your answers to 4 decimal places, e. g., 32.1616.) c. Which are more relevant? 13. Titan Mining Corporation has 8.9 million shares of common stock outstanding and 330,000 5 percentsemiannual 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.

----------------------------------------------------------------------------------------------- FIN 571 Week 4 DQ 1

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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.

----------------------------------------------------------------------------- FIN 571 Week 4 DQ 2