Titan Mining Corporation has 4.3 million shares of common stock outstanding and 85,000 6.8% semi annual bonds outstanding, par value of $ 1,000 each. The common stock currently sells for $ 58 per share, and has a beta of 0.90. The bonds have 23 years remaining till maturity, and sell for 93% of par. The market risk premium is 7%, T-bills are yielding 5%, and Titan’s tax rate is 35%. Currently, the firm also has 8 % preferred stock selling for $ 95 per share. Floatation costs for 3% for both preferred and common stock. Assume that the firm has to raise new common and preferred equity to finance new ventures.
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?