What rate should firm use to discount projects cash flows

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Reference no: EM131023194

Titan Mining Corporation has 9.6 million shares of common stock outstanding and 400,000 6 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $44 per share and has a beta of 1.3, and the bonds have 20 years to maturity and sell for 115 percent of par. The market risk premium is 8.4 percent, T-bills are yielding 4 percent, and Titan Mining’s tax rate is 40 percent. What is the firm's market value capital structure? 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: EM131023194

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