Over-the-Top Canopies (OTC) is evaluating two independent investments. Project S costs $150,000 and has an IRR equal to 13 percent, and Project L costs $140,000 and has an IRR equal to 11 percent. OTC's capital structure consists of 20 percent debt and 80 percent common equity, and its component costs of capital aire fr = 3%, rg = 11%, and re = 12.5%. If OTC expects to generate $220,000 in retained earnings this year, which project(s) should be purchased? Round your answers to one decimal place. WACC Acceptable? Project S L Thus, -Select- %6 % -Select- -Select- should be purchased.
Over-the-Top Canopies (OTC) is evaluating two independent investments. Project S costs $150,000 and has an IRR equal to 13 percent, and Project L costs $140,000 and has an IRR equal to 11 percent. OTC's capital structure consists of 20 percent debt and 80 percent common equity, and its component costs of capital aire fr = 3%, rg = 11%, and re = 12.5%. If OTC expects to generate $220,000 in retained earnings this year, which project(s) should be purchased? Round your answers to one decimal place. WACC Acceptable? Project S L Thus, -Select- %6 % -Select- -Select- should be purchased.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Over-the-Top Canopies (OTC) is evaluating two independent investments. Project 5 costs $150,000 and has an IRR equal to 13 percent, and Project L costs
$140,000 and has an IRR equal to 11 percent. OTC's capital structure consists of 20 percent debt and 80 percent common equity, and its component costs
of capital are far = 3%, rs = 11%, and re = 12.5%. If OTC expects to generate $220,000 in retained earnings this year, which project(s) should be
purchased? Round your answers to one decimal place.
Acceptable?
Project
S
L
Thus, -Select-
WACC
%
%
should be purchased,
-Select-
-Select-
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