Click here to read the eBook: The Cost of Retained Earnings, rs Click here to read the...

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Click here to read the eBook: The Cost of Retained Earnings,r_s
Click here to read the eBook: Composite, or Weighted Average, Costof Capital, WACC
WACC
Empire Electric Company (EEC) uses only debt and common equity.It can borrow unlimited amounts at an interest rate ofr_d = 10% as long as it finances at its target capitalstructure, which calls for 30% debt and 70% common equity. Its lastdividend (D₀) was $2.95, its expected constant growthrate is 4%, and its common stock sells for $21. EEC's tax rate is40%. Two projects are available: Project A has a rate of return of15%, and Project B's return is 8%. These two projects are equallyrisky and about as risky as the firm's existing assets.
What is its cost of common equity? Round your answer to twodecimal places. Do not round your intermediate calculations.
%

What is the WACC? Round your answer to two decimal places. Donot round your intermediate calculations.
%

Which projects should Empire accept?
-Select-Project A Project B

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aCost of Common Equity Dividend in year 0 D0 295 per share Current selling price per share P0 2100 per share Dividend growth Rate g 400 per year See Answer

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Click here to read the eBook: The Cost of Retained Earnings,rsClick here to read the eBook: Composite, or Weighted Average, Costof Capital, WACCWACCEmpire Electric Company (EEC) uses only debt and common equity.It can borrow unlimited amounts at an interest rate ofrd = 10% as long as it finances at its target capitalstructure, which calls for 30% debt and 70% common equity. Its lastdividend (D0) was $2.95, its expected constant growthrate is 4%, and its common stock sells for $21. EEC's tax rate is40%. Two projects are available: Project A has a rate of return of15%, and Project B's return is 8%. These two projects are equallyrisky and about as risky as the firm's existing assets.What is its cost of common equity? Round your answer to twodecimal places. Do not round your intermediate calculations.%What is the WACC? Round your answer to two decimal places. Donot round your intermediate calculations.%Which projects should Empire accept?-Select-Project A Project B