Suppose you have outstanding debt with an 8% interest rate that can be repaid any time, and
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Suppose you have outstanding debt with an 8% interest rate that can be repaid any time, and the interest rate on U.S. Treasuries is only 5%. You plan to repay your debt using any cash that you don’t invest elsewhere. Until your debt is repaid, what cost of capital should you use when evaluating a new risk-free investment opportunity? Why?
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If the amount use to pay debt is from the cash which could not else be invested anywher...View the full answer
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