Compute the weighted average cost of capital

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Reference no: EM13299236

Option a: piece of equipment that is anticipated to provide an 8% return and can be financed at 5% w/ debt.

Option b: a new machine that would yield a 15% return but would cost 17% to finance through common equity.

Assume debt and common equity each represent 50% of the firms capital structure.

Compute the weighted average cost of capital.

Which project should be accepted?

Reference no: EM13299236

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