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Ch 10: End-of-Chapter Problems - The Cost of Capital X eBook Problem Walk-Through Adamson Corporation is considering four average-risk projects with the following costs and rates of retur: 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 rs -9%, and its tax rate is 25%. It can issue preferred stock that pays a constant dividend of $4.00 per year at $59.00 per share. Also, its common stock currently sells for $50.00 per share; the next expected dividend, Di, is $5.25; and the dividend is expected to grow at a constant rate of 7% per year. The target capital structure consists of 75% common stock, 15% debt, and 10% preferred stock. a. What is the cost of each of the capital components? Do not round Intermediate calculations. Round your answers to two decimal places Cost of debt: % Cost of preferred stock: %% Cost of retained earnings: % b. What is Adamson's WACC? Do not round intermediate calculations. Round your answer to two decimal places. % c. Only projects with expected returns that exceed WACC will be accepted. Which projects should Adamson accept? Select- -Select- Project 1 Project 2 Project 3 Project 4 -Select- - Select Accept Meet