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Project S L Thus, -Select- WACC Acceptable? % % should be purchased. -Select- -Select-

Project S L Thus, -Select- WACC Acceptable? % % should be purchased. -Select- -Select-

Essentials Of Investments
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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E Over-the-Top Canopies (OTC) is evaluating two independent investments. Project S costs $170,000 and has an IRR equal to 9 percent, and Project L costs $160,000 and has an IRR equal to 7 percent. OTC's capital structure consists of 20 percent debt and 80 percent common equity, and its component costs of capital are rat = 4%, rs = 11%, and re = 14.5%. If OTC expects to generate $260,000 in retained earnings this year, which project(s) should be purchased? Round your answers to one decimal place. Project S L eBook Thus, -Select- WACC % % Acceptable? -Select- ✓ -Select- should be purchased. Grade it Now Save & Continue Continue without saving
Transcribed Image Text:E Over-the-Top Canopies (OTC) is evaluating two independent investments. Project S costs $170,000 and has an IRR equal to 9 percent, and Project L costs $160,000 and has an IRR equal to 7 percent. OTC's capital structure consists of 20 percent debt and 80 percent common equity, and its component costs of capital are rat = 4%, rs = 11%, and re = 14.5%. If OTC expects to generate $260,000 in retained earnings this year, which project(s) should be purchased? Round your answers to one decimal place. Project S L eBook Thus, -Select- WACC % % Acceptable? -Select- ✓ -Select- should be purchased. Grade it Now Save & Continue Continue without saving
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