Determine which one has a lower weighted average cost of capital and that will be the one you want to move forward with.

Calculating the Cost of Capital ABC Corporation is a new company that is trying to determine its optimal capital structure to begin operations. It has narrowed its debt and equity choices to two feasible scenarios, but because ABC is a new company, the risk premium (credit spread) and beta (B) are estimates based on similar companies in the marketplace. The final decision on capital structure will be based on minimizing the weighted average cost of capital (WACC). Case Facts Under Scenario 1, ABC will have $15 million in new debt and $30 million in new equity; the risk premium is 3.3 percent, and the beta is 1.15. Under Scenario 2, ABC will have $30 million in new debt and $15 million in new equity; the risk premium is 4.2 percent, and the beta is 1.36. NE Calculating the Cost of Capital ABC Corporation is a new company that is trying to determine its optimal capital structure to begin operations. It has narrowed its debt and equity choices to two feasible scenarios, but because ABC is a new company, the risk premium (credit spread) and beta (B) are estimates based on similar companies in the marketplace. The final decision on capital structure will be based on minimizing the weighted average cost of capital (WACC). Case Facts Under Scenario 1, ABC will have $15 million in new debt and $30 million in new equity; the risk premium is 3.3 percent, and the beta is 1.15. Under Scenario 2, ABC will have $30 million in new debt and $15 million in new equity; the risk premium is 4.2 percent, and the beta is 1.36. NE