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kyle thompson | 04/04/21 3:20 PM Homework: Homework Ch9 Save Score: 0 of 12 pts 5 of 9 (7 complete) HW Score: 52%, 20.8 of 40 pts P9-1 (similar to) Question Help Concept of cost of capital Mace Manufacturing is in the process of analyzing its investment decision-making procedures. Two projects evaluated by the firm recently involved building new facilities in different regions, North and South. The basic variables surrounding each project analysis and the resulting decision actions are summarized in the following table ! a. An analyst evaluating the North facility expects that the project will be financed by debt that costs the firm 6.7%. What recommendation do you think this analyst will make regarding the investment opportunity? b. Another analyst assigned to study the South facility believes that funding for that project will come from the firm's retained earnings at a cost of 182% What recommendation do you expect this analyst to make regarding the investment? c. Explain why the decisions in parts a and b may not be in the best interest of the firm's investors d. If the firm maintains a capital structure containing 40% debt and 60% equity, find its weighted average cost using the data in the table e. both analysts had used the weighted average cost calculated in part d what recommendations would they have made regarding the North and South facilities? 1. Compare and contrast the analysts' Initial recommendations with your findings in parte Which decision method seems more appropriate? Explain why a. An analyst evaluating the North faq -X dation do you think this analyst will make regarding the investment oppor 0 Data Table OA. The analyst will probably recop han the expected financing cost of 8.4% using the after-tax cor (Click on the icon here in order to copy the contents of the data table below OB. The analyst will probably recor into a spreadsheet) han the expected financing cost of 6 7% using the after-tax cos Basic variables North South O C. The analyst will probably reco ter than the expected financing Cost $7,000,000 $6.370,000 cost of 6.7% using the after tal Life 12 years 12 years than the expected financing cost OD. The analyst will probably recon Expected return 8.4% 15.2% of 8.4% using the after-tax cod Least-cost financing Source Debt Equity Cost (after-tax) 6.7% 18.2% Decision Click to select your answer and then Action Invest Don't invest Reason 8.4%> 6.7% cost 15 2% 6.7% cost 15 2%

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