Question: Include explanation please. Muelller Corporation is considering four average risk projects with the following costs and rates of return: Project Cost Expected Rate of Return

Include explanation please.

  1. Muelller Corporation is considering four average risk projects with the following costs and rates of return:

  2. Project Cost Expected Rate of Return

  3. 1 $3,000 15.5%

  4. 2 $2,000 16.0%

    3 $4,000 12.5%

    4 $5,000 13.5%

    This corporation estimates that its debt rate will be rd = 9%, and its tax rate is 30%. It can issue preferred stock that will pay a constant dividend of $5 per year at $45 per share. Also, its common stock is currently selling for $32 per share, and the next expected dividend (D1), is $3.00. This dividend is expected to grow at a constant 6% per year. The target capital structure for Mueller Corporation consists of 75% common stock, 15% debt, and 10% preferred stock.

  5. What is the cost of each of the capital components?
  6. What is Muellers WACC?
  7. Which projects should this corporation accept?

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