2 Please help me answers this question

Excel Online Structured Activity: WACC and optimal capital budget 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 ra = 9%, and its tax rate is 40%. It can issue preferred stock that pays a constant dividend of $4 per year at $48 per share. Also, its common stock currently sells for $38 per share; the next expected dividend, D1, is $4.75; and the dividend is expected to grow at a constant rate of 5% per year. The target capital structure consists of 75% common stock, 15% debt, and 10% preferred stock. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. x Open spreadsheet 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 Project 2 accept reject Project 3 Project 4 C15 fx B D E A WACC and optimal capital budget 1 2. 3 Cost of debt, ra 4. Tax rate, T 5 Preferred dividend 6 Preferred stock price, Pp 7 Common stock price, Po 8 Expected common dividend, D1 9 Common stock constant growth rate, gn 10 % common stock in capital structure 11 % debt in capital structure 12 % preferred stock in capital structure 13 Cost of capital components 14 & WACC calculation: 15 After-tax cost of debt, ra(1 - T) 16 Cost of preferred stock, rp 17 Cost of common stock, rs 9.00% 40.00% $4.00 $48.00 $38.00 $4.75 5.00% 75.00% 15.00% 10.00% Weighted Cost Weights After-tax Cost 15.00% 10.00% 75.00% WACC = 18 19 20 Project acceptance analysis: Accept Project? Y/N 21 22 23 24 25 26 27 28 Projects 1 2 3 4 Cost $2,000 $3,000 $5,000 $2,000 Rate of Return 16.00% 15.00% 13.75% 12.50% Formulas Cost of capital components & WACC calculation: 29 Weights After-tax Cost Weighted Cost Weighted Cost #N/A Cost of capital components 29 & WACC calculation: 30 After-tax cost of debt, ra(1 T) 31 Cost of preferred stock, rp 32 Cost of common stock, rs 33 34 35 Project acceptance analysis: #N/A Weights After-tax Cost 15.00% #N/A 10.00% #N/A 75.00% #N/A WACC = #N/A #N/A 36 37 38 39 40 41 Projects 1 2 3 Cost $2,000 $3,000 $5,000 $2,000 Rate of Return 16.00% 15.00% 13.75% 12.50% Accept Project? Y/N #N/A #N/A #N/A #N/A 4