The Cook Company has the following target capital structure:

Debt ...........30%

Common equity ....... 70

Total capital ........100%

For the coming year, management expects to realize net earnings of $250,000. The past dividend policy of paying out 50 percent of earnings will continue. Present commitments from its banker will allow Cook to borrow $100,000 at 10 percent.

The company's tax rate is 40 percent; the current market price of its stock is $39.96 per share; its last dividend as $1.85 per share; and the expected growth rate is 8 percent.

The firm has the following investment opportunities for the next period:

Management asks you to help them determine what projects (if any) should be undertaken. You proceed with this analysis by answering the following questions:

a. What is the weighted average cost of capital?
b. What are the IRR values for Projects?
c. Which projects should Cook's managementaccept?

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Expected Annual Net Project Project oS 75,000 Cash Flows $15.629 15,582 15.775 14.792 12,858 Life ears 10 years ars ears ears 50.000 25.000 Debt Equity 30% 70% S 250,000.00 Dividend payout 50% BoroW 100.000.00 Interest rate 10% 4000 Tax rate Stock Price Last dividend Growth rate S 39.96 1.85 S 8% Ti