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QUESTION

# Imagine that you are the financial manager for a firm, and your company has a WACC of 4.

Imagine that you are the financial manager for a firm, and your company has a WACC of 4.5%. Two district managers would like funds to pursue a project, and are asking for your approval based on their projected financials.Project A costs \$180,000 today, and will give the company \$25,000 net cash flow per year for the next 15 years. Project B costs \$275,000 today, and will give the company \$30,000 net cash flow per year for the next 20 years. If these proposed projects have risk levels similar to the company as a whole, which project is more desirable? Why? If you have enough funds to do both projects, would you? Show your calculations (including projected cash flows and NPVs) and explain your reasoning

SOLUTION:Evaluation of Project AYear0123456789101112131415 Projected Cash Flows-180000250002500025000250002500025000250002500025000250002500025000250002500025000...