Firm use to discount the project cash flows

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Reference no: EM131873989

Titan Mining Corporation has 10.4 million shares of common stock outstanding and 390,000 7.5 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $53 per share and has a beta of 1.20, and the bonds have 20 years to maturity and sell for 95 percent of par. The market risk premium is 7 percent, T-bills are yielding 5 percent, and Titan Mining’s tax rate is 35 percent.

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: EM131873989

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