Chapter 11 Cost of Capital Po $30 F = Flotation cost, new common stock $1.50 g = 9% K$1.20 $1.20 $28.50 K., $30 $1.50 + 9% + 9%-4.21% + 9% = 13.21% PROBLEMS connect selected problems are available with Connect. Pleasese the preface for more information. Selected problems are available with Connect. Please see the preface for more information. FINANCE Basic Problems L. In March 2010, Hertz Pain Relievers bought a massage machine that provided a c return of 8 percent. It was financed by debt costing 7 percent. In August 2010,I Mr. Hertz came up with a heating compound that would have a return of 14 percent. The Chief Financial Officer, Mr. Smith, 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 a logical approach to using its cost of capital? 2 Sneedy Delivery Sustems can buy a niece of eauipment that is anticipated to pro