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Hanson Aluminum, Inc. is considering whether to build a mill based around a new rolling technology he company has been developing. Management views this project
Hanson Aluminum, Inc. is considering whether to build a mill based around a new rolling technology he company has been developing. Management views this project as being riskier than the average project the company undertakes. Based on their analysis of the projected cash flows, management determines that the project's internal tate of return is equal to the company's marginal cost of capital. If the project goes forward, the company will finance it with newly issued debt. Should management accept or reject this project? A. Accept, because the project returns the company's cost of capital. B. Accept, because the marginal cost of the new debt is less than the project's internal rate of return. C. Reject, because the project reduces the value of the company when its risk is taken into account. D. Management should be indifferent between accepting and rejecting the project
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