Titan Mining Corporation has 9 million shares of equity outstanding and 1,200,000 8.5 per cent semi-annual bonds outstanding, par value £100 each. The equity currently sells for £34 per share and has a beta of 1.20, and the bonds have 15 years to maturity and sell for 93 per cent of par. The market risk premium is 10 per cent, T-bills are yielding 5 per cent, and Titan Mining’s tax rate is 28 per cent.

(a) What is the firm’s market value capital structure?

(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?