Here is the information that Glen has accumulated so far:

The Capital Budgeting Projects

He must choose one of the four capital budgeting projects listed below:

Table 1

t	A	B	C	D
0	(20,800,000)	(19,900,000)	(21,600,000)	(15,100,000)
1	7,770,000	4,990,000	5,850,000	4,700,000
2	7,770,000	5,740,000	6,070,000	6,250,000
3	5,870,000	6,870,000	6,870,000	6,950,000
4	5,870,000	8,750,000	6,070,000	7,790,000
Risk	High	Average	Low	Average

Table 1 shows the expected after-tax operating cash flows for each project. All projects are expected to have a 4 year life. The projects differ in size (the cost of the initial investment), and their cash flow patterns are different. They also differ in risk as indicated in the above table.

The capital budget is $20 million and the projects are mutually exclusive.

Capital Structures

Slamdunk Sporting Goods has the following capital structure, which is considered to be optimal:

Debt	35%
Preferred Equity	10%
Common Equity	55%
	100%

Cost of Capital

Glen knows that in order to evaluate the projects he will have to determine the cost of capital for each of them. He has been given the following data, which he believes will be relevant to his task.

(1)The firm