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As a result of new development areas, Juliett Artisans is planning to open several new shopping centre Jewellery stores. The firm expects they will be able to raise the additional capital required to fund this expansion in the proportions outlined below by their target capital structure. Juliett Artisans’ marginal tax rate is 30%. As of today, Juliett Artisans has 4% coupon debentures outstanding, with a par value of $1,000 each and 16 years till maturity. These debentures are currently trading at $1,085. The firm also has $1.90 dividend preferred stocks outstanding, each with a par value of $20. The current market price of these preferred stocks is $27. The firm’s common stock has a current market price of $32. The common stock paid a dividend of $2.30 this year, with dividends expected to grow at an annual rate of 5%. To raise the additional capital, Juliett Artisans will need to sell new debentures, at a par value of $1,000 each. The issuance costs for each new debenture sold will be $10 per bond. The firm will also issue new $20 par value preferred stocks into the marketplace, which will cost the firm $1.50 per share. The firm will also need to sell new common equity, with issuance costs expected to be $2.50 per share issued.

Juliett Artisans has the following target capital structure:

Required:

a) What is Juliett Artisans’ weighted average cost of capital? Assume new capital is raised in the proportions outlined by their target capital structure.

b) Determine which of the developments outlined in the following investment opportunity schedule should be accepted by Juliett Artisans. Please consider the firms WACC as calculated in Part a) and explain why any project/s should be accepted.

A fast response would be appreciated