1. Adams 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

The company estimates that it can issue debt at a rate of rd = 12%, and its tax rate is 35%. It can issue preferred stock that pays a constant dividend of $5.00 per year at $49.00 per share. Also, its common stock currently sells for $36.00 per share; the next expected dividend, D1, is $3.50; and the dividend is expected to grow at a constant rate of 6% per year. The target capital structure consists of 70% common stock, 20% debt, and 10% preferred stock.

1. What is the cost of each of the capital components?
2. What is Adams WACC?
3. Only projects with expected returns that exceed WACC will be accepted. Which projects should Adams accept?