Company A Company B

Market Value of Equity $700,000 $900,000

Market Value of Debt $300,000 $200,000

Cost of Equity 8% 10%

Cost of Debt 1.5% 3%

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 7%?

Only Company A

Only Company B

Neither Company A nor Company B

Both Company A and Company B