Firm is currently considering plant expansion

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A firm is currently considering plant expansion. There is some question as to what minimum attractive rate of return to use in the economic analysis of the proposed expansion. Banks are currently lending money at 11.5%. The combined cost of capital has been estimated to be 10.25%. In addition, the firm could invest its money in a related sister corporation which pays 14%. What minimum attractive rate of return should we use in analysis of the plant expansion?

Reference no: EM131525833

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