Your company is considering the financing of two projects. Project A has an expected return of 8%. Project A's favored source of financing is debt at a cost of 7%. Project B has an expected return of 12%. Project B's favored source of financing is equity at a cost of 14%.

(A) Suppose Project A were undertaken. Would the project be accepted or rejected? Why or why not?

(B) Suppose Project B were undertaken. Would the project be accepted or rejected? Why or why not?

(C) Suppose the company's capital structure were 45% debt, 55% equity. Calculate the weighted average cost of capital while using the firm's capital structure to finance both. Which project, if any, would be accepted? Which project, if any, would be rejected? Explain.