Alexa's Hardware Warehouse is considering two projects (exclusively)

Project A: Buy more warehouses to expand into Northeastern USA

Project B: Purchase an online retailing company to drive more online sales

Expected free cash flows ($ mil) for the two projects are as follows:

Project A

Year 0: -100

Year 1: 22

Year 2: 22

Year 3: 22

Year 4: 22

Year 5: 20

Year 6: 4

Year 7: 4

Year 8: 4

Year 9: 2

Year 10: 2

Project B

Year: 0: -100

Year 1: 6

Year 2: 6

Year 3: 6

Year 4: 6

Year 5: 16

Year 6: 16

Year 7: 22

Year 8: 22

Year 9: 22

Year 10: 26

Which project (in any) should be picked any why?

Given Info:

General Retail

• Beta: 1.14; Cost of Equity: 7.87%; E/V: 75.70%; Cost of Debt: 3.67%; Tax Rate: 15.49%; D/V: 24.30%; Cost of Capital: 6.62%

Online Retail:

• Beta: 1.23; Cost of Equity: 8.32%; E/V: 88.60%; Cost of Debt: 3.67%; Tax Rate: 2.92%; D/V: 11.40%; Cost of Capital: 7.68%