The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 18%, its before-tax cost of debt is 9%, and its marginal tax rate is 25%. Assume that the firm's long-term debt sells at par value. The firms total debt, which is the sum of the companys short-term debt and long-term debt, equals $1,173. The firm has 576 shares of common stock outstanding that sell for $4.00 per share.

Assets			Liabilities And Equity
Cash	$ 120		Accounts payable and accruals	$ 10
Accounts receivable	240		Short-term debt	43
Inventories	360		Long-term debt	1,130
Plant and equipment, net	2,160		Common equity	1,697
Total assets	$2,880		Total liabilities and equity	$2,880

Calculate Paulson's WACC using market-value weights. Do not round intermediate calculations. Round your answer to two decimal places.

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Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of r_d = 11% as long as it finances at its target capital structure, which calls for 25% debt and 75% common equity. Its last dividend (D₀) was $3.50, its expected constant growth rate is 3%, and its common stock sells for $26. EEC's tax rate is 25%. Two projects are available: Project A has a rate of return of 15%, and Project B's return is 10%. These two projects are equally risky and about as risky as the firm's existing assets.

1. What is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.

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2. What is the WACC? Do not round intermediate calculations. Round your answer to two decimal places.

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3. Which projects should Empire accept?

   Project L requires an initial outlay at t = 0 of $59,931, its expected cash inflows are $10,000 per year for 9 years, and its WACC is 13%. What is the project's IRR? Round your answer to two decimal places.

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