Highland Log grows and harvests timber for the construction industry. WV Log Homes designs and produces log

Question:

Highland Log grows and harvests timber for the construction industry. WV Log Homes designs and produces log home kits that are ready for delivery to a new home site. Highland Log has a cost of capital of 11 percent while WV Log Homes cost of capital is 14 percent. Both Highland Log and WV Log Homes are considering expanding into the design and production of log barn kits. The initial cost of the expansion project is $156,000 and the projected cash inflows are $45,000 a year for 5 years. Which firm, or firms, if either, should expand into the log barn kits?

a. Highland Log only

b. WV Log Homes only

c. both Highland Log and WV Log Homes

d. neither Highland Log nor WV Log Homes

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...