Company A Company B
Market Value of Equity $350,000 $150,000
Market Value of Debt $100,000 $150,000
Cost of Equity 9% 10%
Cost of Debt 1.5% 2%
Tax Rate 30% 25%
Based solely on their current weighted average cost of capital, which company should pursue an investment opportunity with an expected return of 5.5%?
a.)Only Company B.
b.)Neither Company A nor Company B.
c.)Only Company A.
d.)Both Company A and Company B.