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1 (8%) Below is the table of an investment project evaluation for Hospital Sunrise. Assume there are no incremental revenues attached to these two projects

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1 (8%) Below is the table of an investment project evaluation for Hospital Sunrise. Assume there are no incremental revenues attached to these two projects in the table. Here are the net cash flow estimates in thousands of dollars. (8%) Year 0 Project A ($1,000) (310) (310) 310) Project B (510) (500) (500) (500) 3 a. Assume initially that the system both projects have average risk (discount rate is 10%). which project should be chosen? (3%) b. Assume that Project B is judged to have higher risk. Hospital Sunrise accounts for differential risk by adjusting its corporate cost of capital up or down by 3% points. which project should be chosen and at what rate? (5%)

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