Titan Mining Corporation has 8.9 million shares of common stock outstanding, 330,000 shares of 5 percent preferred stock outstanding, and 175,000 7.7 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $37 per share and has a beta of 1.45, the preferred stock currently sells for $87 per share, and the bonds have 15 years to maturity and sell for 118 percent of par. The market risk premium is 7.7 percent, T-bills are yielding 4 percent, and the companys tax rate is 40 percent.

If the company 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?