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Titan Mining Corporation has 9.9 million shares of common stock outstanding, 430,000 shares of 6.1 percent...

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Finance

Titan Mining Corporation has 9.9 million shares of common stockoutstanding, 430,000 shares of 6.1 percent semiannual bondsoutstanding, par value $1,000 each. The common stock currentlysells for $47 per share and has a beta of 1.15; the bonds have 20years to maturity and sell for 118 percent of par. The market riskpremium is 8.7 percent, T-bills are yielding 5 percent, and thecompany’s tax rate is 24 percent.

a. What is the firm’s market value capital structure? (Do notround intermediate calculations and round your answers to 4 decimalplaces, e.g., .1616.)

b. If the company is evaluating a new investment project thathas the same risk as the firm’s typical project, what rate shouldthe firm use to discount the project’s cash flows?

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