The following information about three independent, indivisible-capital budgeting projects has been given to the CFO of Jumbo Jets (JJ):

Project Cost IRR

L $100,000 20.0%

Q 150,000 17.0

Z 200,000 16.0

JJ'S average cost of capital (WACC) is 15 percent if the firm does not have to issue new common stock; if new common stock is needed to finance any of the projects, the WACC is 18 percent. JJ's capital structure consists of 40 percent debt, and it has no preferred stock. If JJ expects to generate $240,000 in retained earnings this year, which project(s) should be purchased?

a. Only Project Q should be purchased.

b. Both Project Q and Project Z should be purchased.

c. All three projects should be purchased.

d. Both Project L and Project Q should be purchased.

e. Only Project L should be purchased.