The company estimates that it can issue debt at a rate of rd = 9%, and its tax rate is 40%. It can issue preferred stock that pays a constant dividend of $6 per year at $57 per share. Also, its common stock currently sells for $39 per share; the next expected dividend, D1, is $4.75; 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. 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 % What is Adamson's WACC? Round your answer to two decimal places. Do not round your intermediate calculations. % Only projects with expected returns that exceed WACC will be accepted. Which projects should Adamson accept? Project 1 Project 2 Project 3 Project 4

a)

Cost of debt (after tax) = 5.4%

Cost of preferred stock ()  = 10.53%

Cost of common stock () = 16.18%

b)

WACC = 14%

c)

project 1 and project 2

Explanation:

Given that:

Debt rate () = 9% = 0.09

Tax rate (T) = 40% = 0.4

Dividend per share () = $6

Price per share () = $57

Common stock price ()= $39

Expected dividend () = $4.75

Growth rate (g) = 4% = 0.04

The target capital structure consists of 75% common stock (), 15% debt (), and 10% preferred stock  ()

a)

Cost of debt (after tax) =`

Cost of debt (after tax) = 5.4%

Cost of preferred stock () = = 10.53%

= 10.53%

Cost of common stock () =

= 16.18%

b)

WACC = 14%

c) Only projects with expected returns that exceed WACC will be accepted. Therefore only project 1 and project 2 would be accepted

d. all of the above are true.

answer; to open a new transaction, the user should type the code/0 along with a new transaction code, when done with that the user should press enter to open the transaction; good luck;