5) Stratified Corp. is looking to install a new air scrubber unit in their main...
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5) Stratified Corp. is looking to install a new air scrubber unit in their main plant. They are mandated by the EPA to instal one or the other of the units; otherwise, the highly profitable plant would be shut down. Stratified is evaluating two units, HT and LT (for Hi Tech and Lo-Tech, respectively). HT has a high initial investment but relatively low operating costs, while LT has a lower initial investment but higher operating costs. The costs of the units are presented below. Stratified's WACC is 7%. Operating Costs (S) Scrubber HT Scrubber L Year 600,000 - 50,000 - 50,000 - 50,000 - 50,000 - 50,000 - 100,000 - 175,000 - 175,000 - 175,000 - 175,000 - 175,000 4 a) b) What is the IRR of each alternative? What is the present value of costs of each alternative? Which scrubber unit should be chosen? c) If the WACC increased to 15% would this affect your recommendation? Briefly explain the reason the result occurred
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