Question 14

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	Company A	Company B
Market Value of Equity	$100,000	$200,000
Market Value of Debt	$300,000	$200,000
Cost of Equity	10%	12%
Cost of Debt	2%	1.5%
Tax Rate	25%	35%

Based solely on their current weighted average cost of capital, which company should pursue an investment opportunity with an expected return of 5%?

• Neither Company A nor Company B

• Only Company A

• Both Company A and Company B

• Only Company B