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A company has a cost of equity (Ke) of 18% and a cost of debt (Kd) of 6%. It has 40% debt in it capital
A company has a cost of equity (Ke) of 18% and a cost of debt (Kd) of 6%. It has 40% debt in it capital structure. It has two investment opportunities of similar risk to its existing business. A costs 4m, will yield 9% and be financed by debt and B costs 6m will yield 15% and be financed by equity. The company should:
a
Accept A alone
b
Accept both projects
c
Accept B alone
d
Accept neither project
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