What is the cost of each of the capital components

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Reference no: EM133335919

Question: Adamson Corporation is considering four average-risk projects with the following costs and rates of return:

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

The company estimates that it can issue debt at a rate of rd = 9%, and its tax rate is 25%. It can issue preferred stock that pays a constant dividend of $5.00 per year at $48.00 per share. Also, its common stock currently sells for $38.00 per share; the next expected dividend, D1, is $4.25; and the dividend is expected to grow at a constant rate of 5% per year. The target capital structure consists of 75% common stock, 15% debt, and 10% preferred stock.

What is the cost of each of the capital components? Do not round intermediate calculations. Round your answers to two decimal places.

Cost of debt: %

Cost of preferred stock: %

Cost of retained earnings: %

What is Adamson's WACC? Do not round intermediate calculations. Round your answer to two decimal places.

Reference no: EM133335919

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