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Concept of cost of capital Mace Manufacturing is in the process of analyzing its investment decision-making procedures. Two projects evaluated by the firm recently involved
Concept of cost of capital Mace Manufacturing is in the process of analyzing its
investment decision-making procedures. Two projects evaluated by the firm recently
involved building new facilities in different regions, North and South. The basic
variables surrounding each project analysis and the resulting decision actions are
summarized in the following table.
Basic variables North South
Cost $6 million $5 million
Life 15 years 15 years
Expected return 8% 15%
Least-cost financing
Source Debt Equity
Cost (after-tax) 7% 16%
Decision
Action Invest Don
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