Answer the following questions:

a. What is Riffa Shoes cost of a new issue of preferred stock? (1 mark)

(Hints: when you calculate the cost of preferred stock, DO NOT FORGET to subtract a preferred stock price with flotation cost / issuance cost of preferred stock)

2. What is Riffa Shoes cost of common stock [using the Dividend Discount Model]

3. Given the cost of debt (Rd) of 7.5%, what is Riffa Shoes cost of capital (WACC) ?

d. Calculate the net present value (NPV) of each project and based on this criteria for which project would you recommend acceptance (use WACC in question [c] as the discount rate)? Explain your decision.