Suppose, a company considers two alternative expansion projects.
The first project requires initial outlay of -$100,000;...
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Suppose, a company considers two alternative expansion projects.The first project requires initial outlay of -$100,000; and thesecond one costs less: - $7,000. Subsequent incremental cash flowsfrom the more expensive project will be $27,000 for 5 years. Thecash flows from the second alternative will be lower: $4,000 for 3years. Which expansion project would you recommend the companyundertakes and why? WACC is 7%.
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