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

[answerhappygod]

10.7
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 targetcapital structure, which calls for 25% debt and 75% common equity.Its last dividend (D0) was $2.70, its expected constantgrowth rate is 3%, and its common stock sells for $21. EEC's taxrate is 25%. Two projects are available: Project A has a rate ofreturn of 15%, and Project B's return is 9%. These two projects areequally risky and about as risky as the firm's existing assets.
What is its cost of common equity? Do not round intermediatecalculations. Round your answer to two decimal places.
%
What is the WACC? Do not round intermediate calculations. Roundyour answer to two decimal places.
%
Which projects should Empire accept?
-Select- Project AProject B
The Evanec Company's next expected dividend, D1, is$3.63; its growth rate is 5%; and its common stock now sells for$38.00. New stock (external equity) can be sold to net $30.40 pershare.
rs = %
F = %
re = %