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EF Candice My Home Courses Catalog and Study Tools CENGAGE MINDTAP Ch 10-End-of-Chapter Problems - The Cost of Capital Back to Assignment Rental Options College Success Tips Career Success Tips Help Give Feedback Attempts Keep the Highest / 3 8. Problem 10.12 (WACC) eBook Q Search this course Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd=9% as long as it finances at its target capital structure, which calls for 45% debt and 55% common equity. Its last dividend (Do) was $3.35, its expected constant growth rate is 3%, and its common stock sells for $28. EEC's tax rate is 25%. Two projects are available: Project A has a rate of return of 15%, and Project B's return is 11%. These two projects are equally risky and about as risky as the firm's existing assets. a. What is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % b. What is the WACC? Do not round intermediate calculations. Round your answer to two decimal places. % c. Which projects should Empire accept? -Select- Grade it Now Save & Continue Continue without saving A-Z