Question
Hanson Aluminum, Incorporated is considering whether to build a mill based around a new rolling technology the company has been developing. Management views this project
Hanson Aluminum, Incorporated is considering whether to build a mill based around a new rolling technology the 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 projects internal rate of return is equal to the companys marginal cost of capital. If the project goes forward, the company will finance it with newly issued debt with an after-tax cost less than the projects IRR. Should management accept or reject this project?
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