Royal Petroleum Co. can buy a piece of equipment that is anticipated to provide a 9 percent return and can be financed at 6 percent with debt.Â Â Later in the year the firm turns down an opportunity to buy a new machine that would yield a 16 percent return but would cost 18 percent to finance through common equity.Â Â Assume debt and common equity each represent 50 percent of the firm's capital structure.
a.Â Â Compute the weighted average cost of capital
b.Â Â Which project (s) should be accepted
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