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12. MTech uses only debt and equity. It can borrow unlimited amounts at an interest rate of 10% if it finances at its target capital
12. MTech uses only debt and equity. It can borrow unlimited amounts at an interest rate of 10% if it finances at its target capital structure, which calls for 35% debt and 65% common equity. It is expected to pay a dividend was $2.50 next year, and dividends are expected to grow at a constant rate of 4.8%. MTech's tax rate is 40% and its stock sells at a price of $25. Two projects are available: Project A has a rate of return of 13.5%, while Project B has a rate of return of 12.7%. All the company's potential projects are equally risky and as risky as the firm's other assets. a) What is MTech's cost of common equity? b) What is MTech's WACC? What does the WACC represent? c) Which projects should MTech select
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