Recently, Hertz Pain Relievers bought a massage machine that provided a return of 8 percent. It was financed by debt costing 7 percent. In August, Mr. Hertz came up with a heating compound that had a return of 14 percent. The chief financial officer, Mr. REntal, told him it was impractical because it would require the issuance of common stock at a cost of 16 percent to finance the purchase. Is the company following an appropriate approach to using its cost of capital?