Part one

The Evanec Company'snext expected dividend, D₁, is $3.63; its growth rate is4%; and its common stock now sells for $38.00. New stock (externalequity) can be sold to net $30.40 per share.

1. What is Evanec's costof retained earnings, r_s? Do not round intermediatecalculations. Round your answer to two decimal places.

   r_s = %

2. What is Evanec'spercentage flotation cost, F? Round your answer to two decimalplaces.

   F = %

3. What is Evanec's costof new common stock, r_e? Do not round intermediatecalculations. Round your answer to two decimal places.

   r_e = %.

part two

Adamson Corporation isconsidering four average-risk projects with the following costs andrates of return:

Project	Cost		Expected Rate ofReturn
1	$2,000		16.00%
2	3,000		15.00
3	5,000		13.75
4	2,000		12.50

The company estimatesthat it can issue debt at a rate of r_d = 11%, and itstax rate is 25%. It can issue preferred stock that pays a constantdividend of $7.00 per year at $57.00 per share. Also, its commonstock currently sells for $50.00 per share; the next expecteddividend, D₁, is $4.75; and the dividend is expected togrow at a constant rate of 6% per year. The target capitalstructure consists of 75% common stock, 15% debt, and 10% preferredstock.

1. What is the cost ofeach of the capital components? Do not round intermediatecalculations. Round your answers to two decimal places.

   Cost of debt: %

   Cost of preferredstock: %

   Cost of retainedearnings: %

2. What is Adamson'sWACC? Do not round intermediate calculations. Round your answer totwo decimal places.

   %

3. Only projects withexpected returns that exceed WACC will be accepted. Which projectsshould Adamson accept?

part 3

5 years ago, BartonIndustries issued 25-year noncallable, semiannual bonds with a$1,000 face value and a 9% coupon, semiannual payment ($45 paymentevery 6 months). The bonds currently sell for $896.87. If thefirm's marginal tax rate is 25%, what is the firm's after-tax costof debt? Do not round intermediate calculations. Round your answerto two decimal places.