What discount rate should the firm apply to a new project

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Titan Mining Corporation has 14 million shares of common stock outstanding, 900,000 shares of 8% preferred stock outstanding and 210,000 semiannual bonds outstanding with coupon rate of 10%, par value $1,000 each. The common stock currently sells for $35 per share and has a beta of 1.5, the preferred stock currently sells for $80 per share, and the bonds have 17 years to maturity and sell for 91 percent of par. The expected return on the market portfolio is 15%, T-bills are yielding 3%, and the firm's tax rate is 34 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: EM13272582

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