St-2 WACC Lancaster Engineering Inc. (LEI) has the following capital structure, which it considers to be optimal: Debt Preferred stock Common equity 25% 15 60 100% LEI's expected net income this year is $34,285.72; its established dividend payout ratio is 30%; its federal-plus-state tax rate is 40%; and investors expect future earnings and dividends to grow at a constant rate of 9%. LEI paid a dividend of $3.60 per share last year, and its stock currently sells for $54.00 per share. LEI can obtain new capital in the following ways New preferred stock with a dividend of $11.00 can be sold to the public at a price of $95.00 per share Debt can be sold at an interest rate of 12% a. Determine the cost of each capital component. b. Calculate the WACC. c. LEI has the following investment opportunities that are average-risk projects: Project Rate of Return 17.4% 16.0 14.2 13.2 12.0 Cost at 0 $10,000 20,000 10,000 20,000 10,000 Which projects should LEI accept? Why? Assume that LEI does not want to issue any nevw common stock