Finance

.

You have recently joined a company, Felicia & Fred, as a financial analyst. The company is headquartered in New England

and manufactures unique fashion jewelry. It prides itself in the U.S. domestic production of these quality accessories,

which are in high demand among its customers.

The owners took the company public last year; hence, it is presently financed exclusively by equity. Despite the

provision of equity capital, the company’s manufacturing capacity still falls short of achieving production adequate to

suffice demand. The company plans to raise additional capital for further expansion of manufacturing facilities by

customizing and refurbishing a large former mill building. What likely effect would the incurrence of debt have on the

weighted average cost of capital? And what likely effect would the incurrence of debt have on the acceptance of expansion

projects?




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