Please help me given correct answer general Accounting Midwest Electric Company (MEC) uses only debt and common equity. It can borrowunlimited amounts at an interest rate of 9% as long as it finances at its target capitalstructure, which calls for 40% debt and 60% common equity. Its last dividend (DO) was $1.55,its expected constant growth rate is 6%, and its common stock sells for $25. MEC's tax rateis 40%. Two projects are available: Project A has a rate of return of 10%, while Project B'sreturn is 8%. These two projects are equally risky and about as risky as the firm's existingassets.What is its cost of common equity?

Step 1: Define Cost Of EquityThe cost of equity is the financing cost that the firm must undertake…

Answered: Midwest Electric Company (MEC) uses…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 7P

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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 40% debt and 60% common equity. Its last dividend (Do) was $1.75, its expected constant growth rate is 3%, and its common stock sells for $26. EEC's tax rate is 25%. Two projects are available: Project A has a rate of return of 14%, and Project B's return is 8%. These two projects are equally risky and about as risky as the firm's existing assets. a. What is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. .66 % b. What is the WACC? Do not round intermediate calculations. Round your answer to two decimal places. % c. Which projects should Empire accept? Project A V
Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 10% as long as it finances at its target capital structure, which calls for 25% debt and 75% common equity. Its last dividend (D 0) was $2.55, its expected constant growth rate is 3%, and its common stock sells for $ 22. EEC's tax rate is 25%. Two projects are available: Project A has a rate of return of 14%, and Project B's return is 8%. These two projects are equally risky and about as risky as the firm's existing assets. What is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % What is the WACC? Do not round intermediate calculations. Round your answer to two decimal places.
Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 10% as long as it finances at its target capital structure, which calls for 30% debt and 70% common equity. Its last dividend (D0) was $2.65, its expected constant growth rate is 4%, and its common stock sells for $23. EEC's tax rate is 25%. Two projects are available: Project A has a rate of return of 14%, and Project B's return is 10%. These two projects are equally risky and about as risky as the firm's existing assets. What is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % What is the WACC? Do not round intermediate calculations. Round your answer to two decimal places. % Which projects should Empire accept?
Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of ra E 11% as long as it finances at its target capital structure, which calls for 40% debt and 60% common equity. Its last dividend (Do) was $2.70, its expected constant growth rate is 4%, and its common stock sells for $30. EEC's tax rate is 25%. Two projects are available: Project A has a rate of return of 14%, and Project B's return is 11%. These two projects are equally risky and about as risky as the firm's existing assets. 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. -Select- -Select- Project A Project B % c. Which projects should Empire accept? 4
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ICU Window, ing, is trying to determine its cost of debt. The firm has a debt issue outstanding with 10 years to maturity that is quoted at 104.5 percent of face value. The issue makes semiannual payments and has an embedded cost of 5.6 percent annually. What is ICU's pretax cost of debt? If the tax rate is 23 percent, what is the aftertax cost of debt?
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MEC company uses only debt and equity financing . It can borrow an unlimited amount at an interest rate of 10% as long as it finances as its target capital structure which calls for 45 percent debt,and 55 percent common equity. Its las dividend was $2,its expected constant growth rate is 4 percent,and its stock is currently listed at $20 per share. Its tax rate is 40 percent. Two projects are available that they can invest in, the first project “A” has a rate of return 13 percent,and project “B” has a rate of return of 10 percent . Assume that all of its potential projects are equally risky,and as risky as he firm’s other assets. a) Calculate MEC’s cost of common equity. b)Calculate the Weighted Average Cost of Capital (wacc) of MEC. c) Evaluate the projects “A “and “B “ ,and decide which project should MEC select ?
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