In march 2010 hertz pain relievers bought a message machine

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In March 2010 Hertz Pain Relievers bought a message machine that provided a return of 8 percent. It was financed by debt costing 7 percent. In August 2010, MR. Hertz came up with a heating compound that would have a return of 14 percent. The Chief Financial Officer, Mr. Smith told him it was impractical because it would require the issue of common stock at a cost of 16 percent to finance the purchase. Is the company following a logical approach to using cost of capital?

Reference no: EM13382097

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