Question: Adamson Corporation is considering four average-risk projects with the following costs and rates of return: Project / Cost Expected / Rate of Return

(1) (2,000($) 16.00%

(2) (3,000($) 15.00%

(3) (5,000($) 13.75%

(4) (2,000($) 12.50%

The company estimates that it can issue debt at a rate of rd = 9%, and its tax rate is 30%. It can issue preferred stock that pays a constant dividend of $3 per year at $58 per share. Also, its common stock currently sells for $31 per share; the next expected dividend, D1, is $4.25; and the dividend is expected to grow at a constant rate of 4% per year. The target capital structure consists of 75% common stock, 15% debt, and 10% preferred stock.

A) What is the cost of each of the capital components? Round your answers to two decimal places. Do not round your intermediate calculations. Cost of debt (?)% Cost of preferred stock (?)% Cost of retained earnings (?)%

B) What is Adamson's WACC? Round your answer to two decimal places. Do not round your intermediate calculations. (?)%

C) Only projects with expected returns that exceed WACC will be accepted. Which projects should Adamson accept?

Project 1 _______accept/reject

Project 2 _______accept/reject

Project 3 _______accept/reject

Project 4 _______accept/reject