Question 3 (25 Marks) a)In determining the weighted average cost of capital (WACC) of a company, why is there a cost for internal common equity, i.e., retained earnings? (5 marks) b) Central Automated Company (CAC) has the following capital structure, which it considers to be optimal: CAC's expected net income this year is $5,482,450.00, its established dividend payout ratio is 30%, its tax rate is 35%, and investors expect earnings and dividends to grow at a constant rate of 8% in the future. CAC paid a dividend of $4.00 per share last year, and its stock currently sells at a price of $55.00 per share. CAC can obtain new capital in the following ways: Preferred: New preferred stock with a dividend of $12 can be sold to the public at a price of $90 per share. Debt: Debt can be sold at an interest rate of 10%. Required: i) Determine the cost of each capital structure component. (9 marks) ii) Calculate the weighted average cost of capital for the company. (6 marks) iii) CAC has the following independent investment opportunities that are typical average-risk projects for the firm: Indicate which project(s) CAC should accept, giving your reasons