(a) A corporation is considering a capital project for the coming year. The project has an...

   

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(a) A corporation is considering a capital project for the coming year. The project has an internal rate of return of 14 percent. If the firm has the following target capital structure and costs, comment on what should their decision be and why. Source of Capital Long-term debt Preferred stock Common stock equity Proportion After-Tax Cost 0.40 0.10 0.50 10% 15% 20% (7 marks) (a) A corporation is considering a capital project for the coming year. The project has an internal rate of return of 14 percent. If the firm has the following target capital structure and costs, comment on what should their decision be and why. Source of Capital Long-term debt Preferred stock Common stock equity Proportion After-Tax Cost 0.40 0.10 0.50 10% 15% 20% (7 marks)

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