Question
EX11. 4. Over-the-Top Canopies (OTC) is evaluating two independent investments. Project S costs $155,000 and has an IRR equal to 13 percent, and Project L
EX11. 4. Over-the-Top Canopies (OTC) is evaluating two independent investments. Project S costs $155,000 and has an IRR equal to 13 percent, and Project L costs $145,000 and has an IRR equal to 12 percent. OTC's capital structure consists of 20 percent debt and 80 percent common equity, and its component costs of capital are rdT = 5%, rs = 8%, and re = 9.5%. If OTC expects to generate $230,000 in retained earnings this year, which project(s) should be purchased? Round your answers to one decimal place.
Project | WACC | Acceptable? |
S | ___% | YES or NO |
L | ___% | YES or NO |
-> Thus, [ONLY PROJECT S / ONLY PROJECT P / BOTH PROJECTS / NEITHER PROJECT] should be purchased.
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