Calculate the WACC for a firm based on the following assumptions:

The firm's corporate tax rate equals 25%

The firm has an outstanding bond issue with remaining maturity of 15 years, with a coupon rate of 9-percent paid semi-annually, a face value of $1,000 that currently sells for $1,050.

Their current preferred stock outstanding sells for $50 and earns a dividend of $6

Their common stock sells for $26 per share currently, just paid an annual dividend of $4 per share, and has a dividend growth rate of 6% per year.

The flotation cost of new equity is 5%.

Optimal capital structure is 40% debt, 10% preferred stock, 30% retained earnings, and 20% new equity.

1. What is the WACC for the firm based on utilizing the optimal capital structure?

2. Should the firm pursue the following projects, assuming the risk of each project is comparable to the risk of the overall firm?

Project Investment Expected Return

A 2,000 9%

B 3,000 18%

C 8,000 11%

D 4,000 15%