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Giving the following 2 capital structures available to fund a project: Capital Structure A Capital Structure B Sources of fund Weight Source of fund Weight

Giving the following 2 capital structures available to fund a project:

Capital Structure A

Capital Structure B

Sources of fund

Weight

Source of fund

Weight

Common shares

25%

Preferred shares

25%

Bonds

20%

Loan

35%

Retained earnings

45%

Bond

35%

Loan

10%

Common shares

5%

If both capital structures have WACC of 12.5%, which capital structure you recommend giving that the finance manager is risk seeker (taker)? Why?

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