WACC and optimal capital budget Adams Corporation is considering four average-risk projects with the following costs and rates of return: Project Cost Expected Rate of Return 1--------$2,000---16.00% 2-------- 3,000---15.00 3-------- 5,000--- 13.75 4-------- 2,000--- 12.50 The company estimates that it can issue debt at a rate of rd = 10%, and its tax rate is 35%. It can issue preferred stock that pays a constant dividend of $4 per year at $59 per share. Also, its common stock currently sells for $31 per share; the next expected dividend, D1, is $3.25; and the dividend is expected to grow at a constant rate of 6% per year. The target capital structure consists of 75% common stock, 15% debt, and 10% preferred stock. 1. What is the cost of each of the capital components? Round your answers to two decimal places. Cost of debt ___________________% Cost of preferred stock __________% Cost of retained earnings ________% 2. What is Adams' WACC? Round your answer to two decimal places. ______%