Problem $10\mathrm{.}18($WACC and Optimal Capital Budget$)$

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Adamson Corporation is considering four average$-$risk projects with the following costs and rates of return:

The target capital structure consists of $75\%$ common stock, $15\%$ debt, and $10\%$ preferred stock.

a$.$ What is the cost of each of the capital components? Do not round intermediate calculations. Round your answers to two decimal places.

Cost of debt:

Cost of preferred stock:

Cost of retained earnings:

b$.$ What is Adamson's WACC? Do not round intermediate calculations. Round your answer to two decimal places.

c$.$ Only projects with expected returns that exceed WACC will be accepted. Which projects should Adamson accept?

Project $1$

Project $2$

Project $3$

Select$-$

Project $4$

$-$Select$-V$