20. Problem 11.14 (Choosing Mandatory Projects on the Basis of Least Cont) AZ ebook Kim Inc. must install new air conditioning unit in main plant. Kim must install one or the other of the units, otherwise, the high profitable plant would have to shut down. The units are available, HCC and LCC (for high and low capital costs, respectively). HCC has a high capital cost but relatively low operating costs, while LCC has a low capital cost but higher operating costs because tuges more electricity. The costs of the unts are shown here. Kim's WACC 87% HOC LOC NE -$600,000 -$45,000 -345,000 $45,000 -$45,000 -345,000 -3110,000 $170,000 -$170,000 -$170,000 -$170,000 -$170,000 Which ont would you recommend? 1. Since we are mining cost, the unit those would be the one that had the NPV of costs. Since CCNPV of cost is tower than LC, MOC would be chosen n. Since we are examining costs, the unit could be the one that had the lower of costs. Since LCC Nov of consistomer than HOC, LCC would be chosen in. Since of the cash flow are negative, the cannot be calculated and a temative method must be employed IV. Since of the couch flows are negative, the Vs will be negative and we do not accept any project that has a negative V. Since of the car ownegative, the 's will be negative and we do not accept any project that has a negative Do's controller wanted to know the the two projects, what would you til 1. The IRR of each project is negative and therefore not used for decision-making 1. The bull cannot be calculated the cath flow we are in change or would be needed in order to come The can be seed because the cash flow are in the form of an annut 1. The te of each project will be poster WACC There are multiples for each pre MacBook Pro 8 o E R Y U O P D F G K L C V V V B N M 4 at command option c. If the WACC rose to 14% would this affect your recommendation? 1. When the WACC Increases to 14, the IRR for HCC is greater than the IRR for LCC, HCC would be chosen 11. Since all of the cash flows are negative, the NPV's will be negative and we do not accept any project that has a negative NPV. 11. When the WACC increases to 14%, the NPV of costs we now lower for LCC than MCC. N. When the WACC increases to 14%, the NPV of costs are now lower for HCC than LCC. When the WACC increases to 14%, the 12 for greater than the RR for HCC, LCC would be chosen Why do you think this result occurred? 1. The reason is that when you discount at a higher rate you are making negative che higher thus improving the PV. 11. The reason is that when you discount at a higher rate you are making negatives higher and the lower the NPV m. The reason is that when you discount at a higher rate you are in negative and this lower the NPV. IV. The reason is that when you discount at a higher rate you are making a smaller thus improving the NPV The reason is that when you discount at a higher rute you are making regarve Chigher the improving the TRR Grad Now Save & Continue Continue without saving MacBook Pro 90 8 s 4 3 5 7 8 0 E R Y U O P D F H L