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The Paper People, Inc. is a wholesaler of paper and office supplies and sells directly to other businesses. The company has been widely successful, and
The Paper People, Inc. is a wholesaler of paper and office supplies and sells directly to other businesses. The company has been widely successful, and is looking to purchase a new
warehouse for storage of its inventory. The project involves the purchase of a warehouse twice the size of the current warehouse, as well as providing enhanced equipment for use within
the warehouse. The company uses its WACC as the hurdle rate to be met for new projects. However, since a new project has not been considered in some time, the WACC for the company
needs to first be recalculated.
The Paper People, Inc. uses a combination of bond debt and equity to fund operations, and they have a bond rating of A Company information is provided in the tables below. Based on this
information, determine how The Paper People, Inc. should finance the purchase of the new warehouse and equipment.
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