What rate should firm use to discount projects cash flows

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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 Titan Mining’s tax rate is 40 percent.

a. What is the firm's market value capital structure? (Do not round intermediate calculations and round your final answers to 4 decimal places.

b. If Titan 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?

Reference no: EM13923077

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