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: a. An analyst evaluating the North facility expects that the project will be financed by debt that costs the firm 4.9% What recommendation do you think this analyst will make regarding the investment opportunity? b. Another analyst assigned to study the South facility believes that funding for that project will come from the firm's retained earnings at a cost of 18.4%. What recommendation do you expect this analyst to make regarding the investment? c. Explain why the decisions in parts a and b may not be in the best interest of the firm's investors d. If the firm maintains a capital structure containing 40% debt and 60% equity, find its weighted average cost using the data in the table, e. If both analysts had used the weighted average cost calculated in part d, what recommendations would they have made regarding the North and South facilities? f. Compare and contrast the analysts' initial recommendations with your findings in parte. Which decision method seems more Onnenrista? Fyrlain why *c. The firm is basing its decision on the cost to finance a particular project rather than on the initial cost and life of the project, which would lead to incorrect accept/reject decisions. D. The firm is basing its decision on the cost to finance a particular project rather than on the firm's combined cost of capital, which may lead to incorrect accept/reject decisions. d. If the firm maintains a capital structure containing 40% debt and 60% equity, its weighted average cost is %. (Round to two decimal places.) Clear all Help me solve this Get more help Check answer View an example (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) North $8,000,000 15 years 7.6% South $7,280,000 15 years 15.2% Basic variables Cost Life Expected return Least-cost financing Source Cost (after-tax) Decision Action Reason Debt 4.9% Equity 18.4% Invest 7.6% > 4.9% cost Don't invest 15.2%