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Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at...

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Finance

Empire 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 25% debt and 75% common equity. Its lastdividend (D0) was $2.30, its expected constant growthrate is 4%, and its common stock sells for $24. EEC's tax rate is25%. Two projects are available: Project A has a rate of return of15%, and Project B's return is 11%. These two projects are equallyrisky and about as risky as the firm's existing assets.

  1. What is its cost of common equity? Do not round intermediatecalculations. Round your answer to two decimal places.

    %

  2. What is the WACC? Do not round intermediate calculations. Roundyour answer to two decimal places.

    %

  3. Which projects should Empire accept?

    -Select-Project AProject B

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