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Speedy Delivery Systems can buy a piece of equipment that is anticipated to provide an 10 percent return and can be financed at 7 percent
Speedy Delivery Systems can buy a piece of equipment that is anticipated to provide an 10 percent return and can be financed at 7 percent with debt. Later in the year, the firm turns down an opportunity to buy a new machine that would yield a 17 percent return but would cost 19 percent to finance through common equity. Assume debt and common equity each represent 50 percent of the firms capital structure. a. Compute the weighted average cost of capital.
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