Capital investment analysis is the main responsibility of the controller of Glory Company. During the previous 12-month period, the company's capital mix and the respective costs were as follows:

Plans for the current year call for a 10 percent shift in total financing from debt financing to common stock financing. Also, the cost of debt financing is expected to increase to 4 percent, although the cost of the other types of financing will remain the same.
The controller has already analyzed several proposed capital investments. Those projects and their projected rates of return are as follows: Project M, 7.5 percent; Equipment Item N, 6.2 percent; Product Line O, 5.0 percent; Product Line P, 6.9 percent; Product Line Q, 1.5 percent; Equipment Item R, 3.9 percent; and Project S,6.0 percent.

Required
1. Using the expected adjustments to cost and capital mix, compute the weighted-average cost of capital for the current year.
2. Identify the proposed capital investments that should be implemented based on the cost of capital calculated in requirement 1.

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Percentage of Total Financing 40% 10% 30% 20% Cost of Capital Debt financing Preferred stock Common stock Retained earnings 6