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how do you compute the wieghted average cost of capital?
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A company can buy a piece of equipment that is anticipated to provide an 8% return and can be financed at 5% with debt. Later in the year, the firm turns down an opportunity to buy a new machine that would yeild a 15% return but would cost 17% to finace through common equity. Assume debt and common equity each represent 50% of the firm's capital structure. Now compute the weighted average cost of capital.
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