Scott Inc. has a target capital structure consisting of $50\%$ debt, $20\%$ preferred stock, and $30\%$ common stock. Scott Inc. issued $10-$year $6\mathrm{.}2\%$ semiannual coupon bonds that sell for $$905.$ Scott Inc. also has $1$ million preferred shares outstanding with a dividend rate of $9\mathrm{.}75\%,$ a face value of $$100,$ and a selling price of $$115.$ Additionally, Scott Inc. has $6$ million common shares outstanding and is a constant growth firm that expects to pay a dividend of $$2\mathrm{.}05$ on their common stock. Scott Inc.$\text{'}$s common stock currently sells for $$24\mathrm{.}50$ per share and has a growth rate of $4\%.$ Flotation costs on new common stock would be $10\%$ and the firm's marginal tax rate is $25\%.$

a$.$ What is Scott Inc.$\text{'}$s WACC assuming they can use retained earnings to fund their capital budget?

b$.$ Scott Inc. is reviewing the projects below. Assume these projects are independent and have similar levels of risk. Using the WACC you calculated previously, which of the following projects should be accepted? Why?

$\backslash$table$[[$Project$,$Return $($IRR$)],[$A$,10\mathrm{.}50\%$