Here is the summarized four average risk projects with their rate of returns for Skye Computer Company

Project Name	Expected Rate of Return
1- Building Hospital	17.00%
2- Building School	16.00%
3- Building Stadium	10%
4- Building Park	11.26%

The common stock sells for $55.00, last years dividend D0 was $2.10, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 9%. Skye's preferred stock pays a dividend of $3.30 per share, and its preferred stock sells for $30 per share. The firm can issue long-term debt at an interest rate (or beforetax cost) of 10%, and its marginal tax rate is 35%. The firm's currently outstanding 10% annual coupon rate long-term debt sells at par value. The market risk premium is 5%, the risk-free rate is

6%, and Skye's beta is 1.516. In its cost of capital calculations, the companys capital structure consists of 64.7% common stock, 28.2% debt, and 7.1% preferred stock.

a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock, the cost of equity from retained earnings, and the cost of newly issued common stock.

b. If Skye continues to use the same capital structure, what is the firm's WACC assuming that it expands so rapidly that is must issue new common stock?

c. Assume that all projects are equally risky and based on WACC, which project should Skye

Computer Company accept and which to be rejected? Explain why?

Data Given

D0= $2.10	P0= $55	F= 10%	G=9%
Dp= $3.30	Pp=$30	rd= 10%	T=35%
Rpm 5%	Rfr=6%	b= 1.516
Wd= 28.2%	Wp= 7.1%	Wc= 64.7%