What is its cost of debt and common equity

Assignment Help Financial Management

Reference no: EM131529807

WACC Midwest Electric Company (MEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 9% as long as it finances at its target capital structure, which calls for 25% debt and 75% common equity. Its last dividend (D0) was $1.75, its expected constant growth rate is 6%, and its common stock sells for $28. MEC's tax rate is 40%. Two projects are available: Project A has a rate of return of 11%, while Project B's return is 9%. These two projects are equally risky and about as risky as the firm's existing assets.

What is its cost of common equity? Round your answer to two decimal places. %

What is the WACC? Round your answer to two decimal places. %

Which projects should Midwest accept?

Reference no: EM131529807

Questions Cloud

How would market-value balance sheet change : How would the market-value balance sheet change if Establishment retired all its debt?

What is the company weighted-average cost of capital : What is the company’s weighted-average cost of capital if the corporate tax rate is 35%?

What you have learned from your readings and research : use what you have learned from your readings and research to develop a 1-2 page paper explaining what this means and how it can affect a bank's liquidity.

Background of quality assessment and management tools : Assignment: Influencing Quality. Background of quality assessment and management tools appropriate for primary care

What is its cost of debt and common equity : WACC Midwest Electric Company (MEC) uses only debt and common equity. What is its cost of common equity? Which projects should Midwest accept?

Do you feel that credit-score model is an accurate measure : Discussion- Personal Credit Scores: Do you feel that the credit-score model is an accurate measure for determining credit-worthiness?

What is the irr of the better project : A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: What is the IRR of the better project?

Identify aspects of the life span perspective : Prepare a 900- to 1,150-word paper in which you discuss the life span perspective of human development. Identify aspects of the life span perspective

Discuss the crime and deviance : Explain the social constructionist view of deviance. In your answer, consider the types of questions asked by constructionists.

User Account

All Pages