Suppose Mullens Corporation is considering three average-risk projects with the following costs and rates of return: Project Cost Expected Rate of Return 1 $2,500 12.00% $3,000 $2,750 2 3 19.00% 13.00% Mullens estimates that it can issue debt at a rate of ra = 20.00% and a tax rate of T = 20.00%. It can issue preferred stock that pays a constant dividend of Dp = $10.00 per year and at Pp = $100.00 per share. Also, its common stock currently sells for Po= $50.00 per share. The expected dividend payment of the common stock is D = $5.00 and the dividend is expected to grow at a constant annual rate of g = 5.00% per year. Mullens' target capital structure consists of w, = 75.00% common stock, wd = 15.00% debt, and wp According to the video, the after-tax cost of debt can be stated as approximately According to the video, the cost of preferred stock can be stated as of approximately Hint: Assume no flotation costs. According to the video, the cost of common stock can be stated as of approximately = 10.00% preferred stock. . Plugging in the values for ra and (T) yields an after-tax cost of debt of Plugging in the values for Dp and Pp yields a cost of preferred stock of . Plugging in the values for D, Po, and g yields a cost of common stock PLEASE CLEARLY LABEL. will thumbs up if correct!!

Suppose Mullens Corporation is considering three average-risk projects with the following costs and rates of return: Mullens estimates that it can issue debt at a rate of rd=20.00% and a tax rate of T=20.00%. It can issue preferred stock that pays a constant dividend of Dp=$10.00 per vear and at Pp=$100.00 per share. Also, its common stock currently selis for P0=$50.00 per share. The expected dividend payment of the common stock is D1=$5.00 and the dividend is expected to grow at a constant annual rate of g=5.00% per year Mullens' target capital structure consists of w1=75.00% common stock, wd=15.00% debt, and w2=10.00% preferred stock. According to the video, the after-tax cost of debt can be stated as . Plugging in the values for rd and (T) vieids an after-tax cost of debt of approximately According to the video, the cost of preferred stock can be stated as . Plugging in the values for Dp and Pf yieids a cost of preferred stock of of approximately Hint: Assume no flotation costs. According to the video, the cost of common stock can be stoted as . Plugging in the values for D1,P0, and g vields a cost of common stock of approximately Hint: Assume no flotation costs. According to the video, the cost of common stock can be stated as . Plugging in the values for D1,P0, and g yields a cost of common stock of approximately Recall that the equation for the weighted average cost of capital (WAAC) can be stated as: WAAC=(%ofdebt)(Aftertaxcostofdebt)+(%ofpreferredstack)(Costofpreferredstock)+(%ofCommonequity)(Costofcommonequiry) Plugging in the relevant values into the formula for WACC yields a WAAC of approximately Suppose that Mullens will only accept projects with an expected rate of return that exceeds the WAAC. Which of the following projects will Mullens accept? Check all that apply. Project 1 Project 2 Project 3