6. Problem 10.11 (WACC and Percentage of Debt Financing)

7. Problem 10.12 (WACC)

6. Problem 10.11 (WACC and Percentage of Debt Financing) eBook Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at ro = 11%, and its common stock currently pays a $2.00 dividend per share (D. = $2.00). The stock's price is currently $21.75, its dividend is expected to grow at a constant rate of 7% per year, its tax rate is 25%, and its WACC is 13.60%. What percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your answer to two decimal places. % 7. Problem 10.12 (WACC) eBook Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of ra = 9% as long as it finances at its target capital structure, which calls for 45% debt and 55% common equity. Its last dividend (Do) was $3.00, its expected constant growth rate is 6%, and its common stock sells for $22. EEC's tax rate is 25%. Two projects are available: Project A has a rate of return of 15%, and Project B's return is 8%. These two projects are equally risky and about as risky as the firm's existing assets. a. What is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % b. What is the WACC? Do not round intermediate calculations. Round your answer to two decimal places. c. Which proiects should Empire accept? -Select- Project A Project B