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Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of ras =11 's as long
Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of ras =11 's as long as it findinces atics target capiral structure, which calls for 30% debt and 70% common equity. Its last dividend (Do) was $2.35, its expected constant growth rate is 3%, and its common stock sells for $21. EECis tax rate is 25%. Two projects are available: Project A has a rate of return of 14%, and Project B 's return is 12%. 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 yout answer to two decimal placet. b. What is the WACC? Do not round intermediate calculatiens. Aound your answer to fwo decimal places. c. Which projects should Empire accept
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