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Company A Company B Market Value of Equity $350,000 $150,000 Market Value of Debt $100,000 $150,000 Cost of Equity 9% 10% Cost of Debt 1.5%
Company A | Company B | |
---|---|---|
Market Value of Equity | $350,000 | $150,000 |
Market Value of Debt | $100,000 | $150,000 |
Cost of Equity | 9% | 10% |
Cost of Debt | 1.5% | 2% |
Tax Rate | 30% | 25% |
Based solely on their current weighted average cost of capital, which company should pursue an investment opportunity with an expected return of 5.5%?
a.)Only Company B.
b.)Neither Company A nor Company B.
c.)Only Company A.
d.)Both Company A and Company B.
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