Midwest Electric Company (MEC) uses only debt and common equity. It can borrow unlimited amount at an interest rate of r_d=10% as long as it finances at its target capital structure, which calls for 45% debt and 55% common equity. Its last dividends (D₀) was $2, its expected constant growth rate is 4%, and its common stock sells for $20. MECs tax rate is 40%. Two projects are available: Project A has a rate of return of 13%, while Project Bs return is 10%. These two projects are equally risky and about as risk as exiting assets.

1. What is its cost of common equity?
2. What is the WACC
3. Which projects should Midwest accept?