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pls don't use Excel to solve Adams Corporation is considering four average risk projects with the following costs and rates of return: Project Cost Expected
pls don't use Excel to solve
Adams Corporation is considering four average risk projects with the following costs and rates of return: Project Cost Expected rate of return 16.00% 1 $2 million 2 $3 million 15.00% 3 $5 million 13.75% 4 $2 million 12.50% Currently the company has no debt and preferred stocks. The company estimates that it can Issue 2,000 new bonds at a rate of 10%, coupon rate of 8% and its tax rate is 30%. The bond will mature in 10 years. It can Issue 37,145 new preferred stocks that pay a constant dividend of $5.00 per year at $40.00 per share. Also, Its common stock (total 50,000) currently sells for $35.00 per share; the next expected dividend is $3.50; and the dividend is expected to grow at a constant rate of 6% per year. After the new Issues, the company reaches its target capital structure. 1. What is the cost of each of the capital components? 2. What is the value of each of the capital components? 3. What Is Adams' WACC? 4. Only projects with expected returns that exceed WACC will be accepted. Which projects should Adams acceptStep by Step Solution
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