Problem 10.18 (WACC and Optimal Capital Budget) Question 5 of 10 Check My Work (2 remaining) 1 16.00% 2 4 eBook 11 Problem Walk-Through Adamson Corporation is considering four average-risk projects with the following costs and rates of return: Project Cost Expected Rate of Return $2,000 3,000 15.00 3 5,000 13.75 2,000 12.50 The company estimates that it can issue debt at a rate of rs = 9%, and its tax rate is 25%. It can Issue preferred stock that pays a constant dividend of $5.00 per year at $48.00 per share. Also, its common stock currently sells for $31.00 per share; the next expected dividend, D1, is $2.75; and the dividend is expected to grow at a constant rate of 7% per year. 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. % 96 96 A c. Only projects with expected returns that exceed WACC will be accepted. Which projects should Adamson accept? Project 1 Project 2 Project 3 Project 4 Select Select -Select Check My Work (2 remaining)