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Midwest Electric Company (MEC) 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 $3.05, its expected constant growth rate is 3%, and its common stock sells for $24. MEC's tax rate is 40%. Two projects are available: Project A has a rate of return of 14%, while 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? Round your answer to two decimal places.
____%
b. What is the WACC? Round your answer to two decimal places.
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Essentials of Corporate Finance (8th Ed.): Dividends & Dividend Policy. Paul Inc. announced a $1.50 per share dividend with an ex-date of May 15. If the closing price of Paul's stock was $35 on May 14, what would we expect the price to be on the clos..
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Why and how does one’s credit score matter? For instance, how will a 100 point difference in credit score impact on the home mortgage rate one is offered? What is FICO and how is it computed? What is a “good” score and what is considered a “subprime”..
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