Highland Park Poultry Products $($HPPP$)$ processes chickens and other poultry for sale to restaurants and gourmet food stores in

and around New Brunswick. They are considering expanding their facilities so that they can supply restraurants and gourmet food stores throughout

Northern New Jersey. HPPP$\text{'}$s market research supports their expectation that their high quality products should allow them to gain market share in

their expanded market.

Management has developed the following cash flow projections.

$($$s in $000$s$)$

Do Nothing

Expand

$$4,325$

Plant expansion will require Year $0$ spending of

$$6,350$ in Year $0$ to clean up the waste water from their facility.

Whether or not HPPP expands, they will need to spend

HPPP$\text{'}$s CFO officer has determined that Do Nothing can be valued using a required rate of return of

Part A

$($i$)$ What is the value of HPP$\text{'}$s business if they do nothing?

$($ii$)$ What required rate of return should HPPP use to evaluate expanding their capacity? Choose one.

$($iii$)$ Explain your choice.