ELON company bonds yield to maturity is 10.80%. The company actual dividends are $1.40 in common stocks and $6.00 in preferred stocks. The preferred stocks flotation costs were 4% of price (the price is $70). The price of common stocks is 35. The growth rate in dividends during the last years is 6%. The optimal capital structure is:

Debt 45%

Preferred Stock 15%

Common Equity (Retained Earnings) 40%

The balance of retained earnings of Elon is 22 millions and the tax rate is 30%. If Elon issue new common stocks flotation cost will be $4 per share.

Elon is in the evaluation process of the following projects

Project return Cost

1 7.80% 10 millions

2 11.5% 20 millions

3 9.5% 15 millions

4 10.5% 20 millions

5 8.80% 10 millions

If Elon issue new common stocks, what will be the marginal cost of capital? Which project(s) Elon should accept?