Debt: Five thousand bonds with a face value of $1000 and an initial 20-year term were issued five years ago with a coupon rate of 8%. Coupon interests are paid semi-annually. Today these bonds are selling for $846.30.

Preferred stock: Twenty thousand shares of preferred stock paying an annual dividend of $9.50 are outstanding. The shares currently trade at $79.16.

Common equity: Two hundred thousand shares of common stock are outstanding which are now selling for $22.50 per share. An annual dividend of $1.70 was just paid and is expected to grow indefinitely at 6%.

Target capital structure: The firm's target capital structure is of 50% debt, 10% preferred stock, and 40% common equity.

The firm can issue any type of security without paying flotation costs. The tax rate is 40%.

a) Determine the firms cost of capital components. (10 marks) b) Calculate the firm's WACC based on its target capital structure. (2 marks) c) Calculate the firm's WACC based on its market value-based capital structure. (5 marks) d) With the availability of both target and market value-based capital structure, which WACC should be used to evaluate average-risk investment proposal/s? Explain. (1 mark) e) Suppose the firm is evaluating the following average risk projects. Which project/s, if any, should be selected and the total investment to be made? (2 marks)

Project IRR % Initial Investment $ A 10.30 1,200,000 B 10.95 1,000,000 C 11.39 1,500,000 D 11.86 1,400,000 E 12.15 1,700,000 N.B: Use 2-decimal places for all calculations.