Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of r
Posted: Tue Nov 16, 2021 8:26 am
Empire Electric Company (EEC) uses only debt and common equity.
It can borrow unlimited amounts at an interest rate of
rd = 11% as long as it finances at its target
capital structure, which calls for 45% debt and 55% common equity.
Its last dividend (D0) was $2.40, its expected constant
growth rate is 3%, and its common stock sells for $21. EEC's tax
rate is 25%. Two projects are available: Project A has a rate of
return of 15%, and Project B's return is 10%. These two projects
are equally risky and about as risky as the firm's existing
assets.
Selections for Part C are Project A, or Project B.
a. What is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % b. What is the WACC? Do not round intermediate calculations. Round your answer to two decimal places. % c. Which projects should Empire accept? -Select-
It can borrow unlimited amounts at an interest rate of
rd = 11% as long as it finances at its target
capital structure, which calls for 45% debt and 55% common equity.
Its last dividend (D0) was $2.40, its expected constant
growth rate is 3%, and its common stock sells for $21. EEC's tax
rate is 25%. Two projects are available: Project A has a rate of
return of 15%, and Project B's return is 10%. These two projects
are equally risky and about as risky as the firm's existing
assets.
- Empire Electric Company Eec Uses Only Debt And Common Equity It Can Borrow Unlimited Amounts At An Interest Rate Of R 1 (4.86 KiB) Viewed 110 times
a. What is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % b. What is the WACC? Do not round intermediate calculations. Round your answer to two decimal places. % c. Which projects should Empire accept? -Select-