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Company A Company B Market Value of Equity $250,000 $200,000 Market Value of Debt $600,000 $500,000 Cost of Equity 8% 10% Cost of Debt 2% 2% Tax Rate 35% 30% Based solely on their current weighted average cost of capital, which company should pursue an investment opportunity with an expected return of 5%? a) Neither Company A nor Company B b) Only Company B c) Only Company A d) Both Company A and Company B

User AruLNadhaN
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1 Answer

8 votes

Answer:

Neither company

Step-by-step explanation:

They did not receive an investment.

User Rusnyder
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