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problem: Midwest Electric Company [MEC] uses only debt and common equity. It can use unlimited amounts at an interest rate of Rd=10% as long as it finances at its target capital structure, which calls for 45% debt & 55% common equity. Its last dividend was $2, its expected constant growth rate is 4%, and its common stock sells for $20. MEC's tax rate is 40%. Two projects are available. These two (2) projects are equally risky and also about as risky as firm's existing assets.

[A] find out its cost of common equity?

[B] Define the WACC?

Cost Accounting, Accounting

  • Category:- Cost Accounting
  • Reference No.:- M921961

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