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1. Company X has raised 25.000 through bank lending and 100.000 from Equity with the cost of common shares being 9%, the borrowing cost 7%
1. Company X has raised 25.000 through bank lending and 100.000 from Equity with the cost of common shares being 9%, the borrowing cost 7% and a tax rate of 20%. Company X is considering investing in three mutually exclusive investment projects A, B and C: A. An investment plan of initial investment of 50,000, which provides net additional flows of 15,000 per year for the next 5 years. B. Investment plan of initial investment of 30,000, which provides net additional flows of 8,000 per year for the next 5 years. C. Investment plan of initial investment of 38.000, which provides net additional flows of 9.000 per year for the next 5 years. During the 3rd year, maintenance of the equipment is required, which will cost 1.000 for all three investment projects A, B and C. The residual value is zero for all three investment projects. Which investment plan would you choose? Substantiate your response using the re-collection method and the net present value method
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