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	26.00%
2	$3,000	19.00%
3	$2,750	21.00%

Mullens estimates that it can issue debt at a rate of rd=10.00%rd=10.00%and a tax rate of T=25.00%T=25.00%. It can issue preferred stock that pays a constant dividend of Dp=$20.00Dp=$20.00per year and at Pp=$100.00Pp=$100.00per share.

Also, its common stock currently sells for P0=$25.00P0=$25.00per share. The expected dividend payment of the common stock is D1=$5.00D1=$5.00and the dividend is expected to grow at a constant annual rate of g=5.00%g=5.00%per year.

Mullens target capital structure consists of ws=80.00%ws=80.00%common stock, wd=10.00%wd=10.00%debt, and wp=10.00%wp=10.00%preferred stock.

According to the video, the after-tax cost of debt can be stated as . Plugging in the values for rdrdand (T)Tyields 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 DpDpand PpPpyields a cost of preferred stock of 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 D1D1, P0P0, and ggyields a cost of common stock of approximately .

Recall that the equation for the weighted average cost of capital (WAAC) can be stated as:

WAACWAAC	==	(%ofdebt)(After-taxcostofdebt)%ofdebtAfter-taxcostofdebt
		+(%ofpreferredstock)(Costofpreferredstock)+%ofpreferredstockCostofpreferredstock
		+(%ofCommonequity)(Costofcommonequity)+%ofCommonequityCostofcommonequity 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