Question: The CFO of Mega Munchies recently received a report that contains the following information: The WACC is 12 percent if the firm does not have

The CFO of Mega Munchies recently received a report that contains the following information:

The WACC is 12 percent if the firm does not have to issue new common equity; if new common equity is needed, the WACC is 15 percent. If Mega Munchies expects to generate $240,000 in retained earnings this year, which project(s) should be purchased? Assume that the projects areindependent.

Capital Structure Expected Return Type of Capital Proprtion Debt Preferred stock Common equity 60.0 Project Cost $200,000 19.0% 300,000 17.0 200,000 14.0 40.0% 0.0

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