Shumer Inc. is a construction company that plans on purchasing new equipment this year for a new project. The project is expected to return $350,000 per year for the next 5 years. The equipment needed will cost $2,500,000. In order to purchase this equipment, Shumer must acquire the necessary funds from several sources.
The following list shows the proportion of funds expected from each source, and the rate of interest (or similar cost) that will be required for each source:
Does the proposed project's rate of return exceed the company's weighted average cost of capital?

Question

Shumer Inc. is a construction company that plans on purchasing new equipment this year for a new project. The project is expected to return $350,000 per year for the next 5 years. The equipment needed will cost $2,500,000. In order to purchase this equipment, Shumer must acquire the necessary funds from several sources. 
The following list shows the proportion of funds expected from each source, and the rate of interest (or similar cost) that will be required for each source:
  Does the proposed project's rate of return exceed the company's weighted average cost of capital?

Quizplus · Accepted Answer

The Answer of Shumer Inc. is a construction company that plans on purchasing new equipment this year for a new project. The project is expected to return $350,000 per year for the next 5 years. The equipment needed will cost $2,500,000. In order to purchase this equipment, Shumer must acquire the necessary funds from several sources. 
The following list shows the proportion of funds expected from each source, and the rate of interest (or similar cost) that will be required for each source:
  Does the proposed project's rate of return exceed the company's weighted average cost of capital?