The CFO of Lazy Loungers is evaluating the following independent, indivisible projects:
Project
Cost IRR
A $10,000 21.0%
B 15,000 20
C 25,000 16
Lazy's weighted average cost of capital (WACC) is 14 percent if the firm does not have to issue new common equity; if new common equity is needed, its WACC is 17 percent. Lazy's capital structure consists of 40 percent debt. If Lazy has no preferred stock and expects to generate $24,000 in retained earnings this year, which project(s) should be purchased?