Midwest Electric Company (MEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate ofr_d= 11%as long as it finances at its target capital structure, which calls for 35% debt and 65% common equity. Its last dividend (D₀) was $3.15, its expected constant growth rate is 4%, and its common stock sells for $29. MEC's tax rate is 40%. Two projects are available: Project A has a rate of return of 15%, while Project B's return is 10%. These two projects are equally risky and about as risky as the firm's existing assets.

2. What is its cost of common equity? Round your answer to two decimal places.%
3. What is the WACC? Round your answer to two decimal places.%
4. Which projects should Midwest accept?