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%. a. What is the firm’s market value capital structure? (Enter your answers in whole dollars.) Debt Market value $ 178080000 $ 381300000 $ 35890000 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? Get Finance homework help today