Question

I have a similar question like the last one…Tarrasa Mining Corporation has 8.5 million shares of common

stock outstanding and 200,000 7.5% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $34 per share and has a beta of 1.20. The bonds have 15 years to maturity and sell for 93% of par. The market risk premium is 7%, T-bills are yielding 5%, and Tarrasa Mining’s tax rate is 35%.

What is the firm’s market value weight of equity? (Answer should be in decimal form with the zero in front of the decimal. Round answer to 4 decimal places, round any intermediate calculations to 5 decimal places). 

What is the firm’s market value weight of debt? (Answer should be in decimal form with the zero in front of the decimal. Round answer to 4 decimal places, round any intermediate calculations to 5 decimal places). 

What is the firm’s cost of equity? (Answer should be in decimal form with the zero in front of the decimal. Round answer to 4 decimal places, round any intermediate calculations to 5 decimal places). 

What is the firm’s cost of debt? (Answer should be in decimal form with the zero in front of the decimal. Round answer to 4 decimal places, round any intermediate calculations to 5 decimal places). 

If Tarrasa 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? (Answer should be in decimal form with the zero in front of the decimal. Round answer to 4 decimal places. When using previous answers, use the rounded answer as it was given in the answer box). 

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