12/13

Titan Corporation has 10 million shares of common stock outstanding with a price of 29.4 per share.

Covariance between stock returns of Titan and returns of S&P 500 index is 0.95; and the variance of returns of S&P 500 is 0.9. The market return is 10%, and the T-bills are yielding 4%. Titan's tax rate is 30%.

Titan currently has 40,000 7% semi-annual coupon bonds outstanding (Par value =1,000). The bonds will mature in 15 years and are currently priced at $1,000 per bond

1.What is Titan's cost of debt? Show your work carefully.

2.What is the beta of Titan's stock ? Please show your work carefully.

3.What is Titan's cost of equity? Show your work carefully.

4.What is Titan's WACC? Show your work carefully.