Empire electric company eec uses only debt and common, Ask an Expert

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Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 9%, as long as it finances at its target capital structure, which calls for 35% debt and 65% common equity. Its last dividend (Do) was $2.20, its expected constant growth rate is 6%, and its common stock sells for $26. EEC's tax rate is 40%. Two projects are available: project A has rate of return 12%, and project B/S return is 11%. These two projects are equally risky and about as risky as the firm's existing assets.

What is its cost of common equity?

Which is the WACC?

Which projects should Empire accept?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91825910

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