Excel Online Structured Activity: WACC and optimal capital budget Adamson Corporation is considering four average-risk projects with the following costs and rates of return: Expected Rate of Return 16.00% 15.00 13.75 Project 1 2 Video 3 4 Cost $2,000 3,000 5,000 2,000 The company estimates that it can issue debt at a rate of ra 10 %, and its tax rate is 35%. It can issue preferred stock that pays a constant dividend of $4 per year at $43 per share. Also, its common stock currently sells for $31 per share; the next expected dividend, D, is $3.25; and the dividend is expected to grow at a constant rate of 6% per year. The target capital structure consists of 75% common stock, 15% debt, and 10% preferred stock. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. 12.50 X Open spreadsheet a. What is the cost of each of the capital components? Round your answers to two decimal places. Do not round your intermediate calculations. Cost of debt % Cost of preferred stock Cost of retained earnings % 3 debt, re 4 T 5 6 7 n stock price, Po 8 d common dividend, D 9 n stock constant growth rate, gr 10 11 n capital structure 12 red stock in capital structure 13 d dividend d stock price, Pp 14 ost of capital components & WACC calculation: cost of debt, ra(1-T) 16 breferred stock, p 15 17 common stock, r 21 22 18 19 20 acceptance analysis: 23 24 25 26 27 28 on stock in capital structure Projects 1 2 3 36 37 38 39 40 41 42 4 Formulas ost of capital components & WACC calculation: 29 30 31 preferred stock, p cost of debt, ra(1-T) 32 common stock, r 33 34 35 acceptance analysis: Projects 1 234 10.00% 35.00% $4.00 $43.00 $31.00 $3.25 6.00% 75.00% 15.00% 10.00% Weights After-tax Cost 15.00% 10.00% 75.00% Cost $2,000 $3,000 $5,000 $2,000 WACC = Cost $2,000 $3,000 $5,000 $2,000 Rate of Return 16.00% 15.00% 13.75% 12.50% Weights After-tax Cost 15.00% 10.00% 75.00% #N/A #N/A #N/A WACC= Rate of Return 16.00% 15.00% 13.75% 12.50% Weighted Cost Accept Project? Y/N Weighted Cost #N/A #N/A #N/A #N/A Accept Project? Y/N #N/A #N/A #N/A #N/A