H2X Incorporated has accounts payable of $400,000 (a typical amount for the company, non-interest bearing), a bank loan of $700,000 at 9% interest rate, a bank loan of $1,000,000 at 6.5% interest rate, and equity of $2,800,000. Its income tax rate is 32%. Management estimates the companys cost of equity is 14%.

16. Company managers are projecting that the new manufacturing equipment from question 15 will produce a return on assets of 11%. Should the company proceed with this plan?