1 BPM Ltd. has the following capital structure: 40% debt and 60% equity. The cost of retained earnings is 13%, and the cost of new common stock is 16%. BPM will not have any retained earnings available in the upcoming year. Its before tax cost of debt is 8%, and its corporate tax rate is 40%. BPM is considering between two mutually exclusive projects that have the following cash flows: Today Year 1 Year 2 Year 3 Project A Cost = 100 million+ 50 million+ 30 million+ 50 million Project B Cost = 150 million+ 50 million+ 60 million+ 80 million Which project should BPM choose? Project A since its NPV is $16 million. Project A since its net present value (NPV) is +$5.01 million. 4 Project B since its NPV is $22 million