1. Titan Mining Corporation has 8 million shares of common stock outstanding, 5 million shares of preferred stock outstanding, and 100,000 units of 9 percent semiannual bonds outstanding, par value $1,000 each. The preferred stock pays a dividend of $6 per share. The common stock currently sells for $32 per share and has a beta of 1.15, the preferred stock currently sells for $67 per share, and the bonds have 15 years to maturity and sell for 91 percent of par. The market risk premium is 10 percent, T-bills are yielding 5 percent, and Titan Minings tax rate is 35 percent.

1. If Titan Mining is evaluating a new investment project that has the same risk as the firms typical project, what rate should the firm use to discount the projects cash flows?

Answer: Rate of return firm should use in 13.51%