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, and its tax rate is 40%. It can issue preferred stock that pays constant dividend of 56 per year at 143 per share. Also, common stock currently sells for $33 per share the next expected dividend $3.00) and the dividend is expected to grow at a constant rate of per year. The target capital structure consists of 75% common stock, 15% debt, and 10% pretired stock. The data has been collected in the Microsoft Excel Online fie below, Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet 3. 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 v here Project 3 Project 4 D E H M N . WACC and optimal capital budget 2 3 Cost of del 1 Tax rate, Preferred dividend Preferred stock price. Po 7 Common stock price, Expected common dividend. Di Common stock constant growth rate, 10 % common stock in capital structure IT debt in aptal structure 12 Spreferred stock in capital structure 13 Cost of capital components 14 & WACC calculation 15 Alertax cost of detit. - 16 Cost of preferred stock 17 Cost of common stock 000 40005 58.00 $43.00 $33.00 $3.00 7.00% 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 Rate of Projects 21 22 33 Return 16.00 Aco Proiect? YN ON Cost 52.000 $3,000 $5,000 $2.000 15.00% 13.75% 12.50 33 26