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3) Fox Con, a new Wisconsin company, plans to build a factory for $20 million. The company's financing plan is: $5 million in stock sales
3) Fox Con, a new Wisconsin company, plans to build a factory for $20 million. The company's financing plan is: $5 million in stock sales at 15% per year; $5 million in bonds at 10% per year; and a loan from the State of Wisconsin for the remaining $10 million. What is the highest possible interest rate that Fox can pay for its loan if they want their weighted average cost of capital not to exceed 10%? If their weighted average cost of capital is 9%, what does that tell you about possible values for the company's minimum acceptable rate of return? Should the company's minimum acceptable rate of return be higher if they are confident of success, or if the factory will be using new unproven technology
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