Titan Mining Corporation has 8 million shares of common stock outstanding, 451,000 shares of 5 percent preferred stock outstanding, and 110,000 7 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $34 per share and has a beta of 1.3, the preferred stock currently sells for $82 per share, and the bonds have 16 years to maturity and sell for 96 percent of par. The market risk premium is 8.5 percent, T-bills are yielding 2.5 percent, and Titan Mining's tax rate is 34 percent.

Required:

(a) The firm's market value capital structure is as follows: D/V is .2547, E/V is.6561, and P/V is.0892.

(b) If Titan Mining is evaluating a new investment project that has the same risk as the firm's typical project, the firm should use a rate of how much?? to discount the project's cash flows.