a) Qadeja Corporation is considering four average risk projects with the following costs and rates of return: Project Cost 1 2 RM2,000 RM3,000 RM5,000 RM2,000 Expected rate of Return 16% 15% 13.75% 12.50% 3 4 The company estimates that it can issue debt at the rate of 10%, and its tax rate is 30%. It can issue preferred stock that pays a constant dividend of RM5 per year at RM49 per share. Also, its common stock currently sells for RM36 per share, the next expected dividend, D1, is RM3.50; and the dividend is expected to grow at a constant rate of 6% per year. The target capital structure consists of 75% common stock, 15% debt and 10% preferred stock. Based on the above information, calculate: i. After tax cost of debt; 11. Cost of preferred stock; Cost of common stock; iv. Weighted average cost of capital (WACC). V. Only project with expected returns that exceed WACC will be accepted. Which projects should Adams accept? b) Explain the importance of cost of capital in financial decisions