What discount rate should the firm apply to a new project

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Question - Twitter Corporation has 13 million shares of common stock outstanding, 900,000 shares of 9 percent preferred stock outstanding and 250,000 ten percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for Rs 34 per share and has a beta of 1.15, the preferred stock currently sells for Rs. 80 per share, and the cost of bonds is 11.20%. The market risk premium is 11.5 percent, T-bills are yielding 7.5 percent, and the firm's tax rate is 30 percent. What discount rate should the firm apply to a new project's cash flows if the project has the same risk as the firm's typical project?

Reference no: EM132600161

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