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Evaluating two independent investments

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Over-the-Top Canopies (OTC) is evaluating two independent investments. Project S costs $150,000 and has an IRR equal to 12 percent, and Project L costs $140,000 and has an IRR equal to 10 percent. OTC's capital structure consists of 20 percent debt and 80 percent common equity, and its component costs of capital are rdT=4% , rs=10% , and re=12.5% . If OTC expects to generate $230,000 in retained earnings this year, which project(s) should be purchased?

Reference no: EM131721483

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