Kim Inc. must install a new air conditioning unit in its main plant. Kim must install one or the other of the units, otherwise, the highly profitable plant would have to shut down, TWO 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 it uses more electricity. The costs of the units are shown here. Kim's WACC is 6%. D 3 HOC LCC -5590,000 $55,000 -$55,000 -$55,000 -$55,000 -$55,000 -$100,000 -$175,000 -$175,000 -$175,000 -$175,000 -$175,000 a. Which unit would you recommend? 1. 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. TI. Since all of the cash flows are negative, the IRR's will be negative and we do not accept any project that has a negative IRA. 1. Since we are examining costs, the unit chosen would be the one that had the lower NPV of costs. Since LCCS NPV of costs ie lower than HCC's, LCC would be Stoce we are examining costs, the unit chosen would be the one that had the lower NPV of costs. Since HCC's NPV of costs is lower than LCC'S, HOC would be chosen V. Since all of the cash nows are negative, the NPV's cannot be calculated and an alternative method must be employed. chosen -Select- 5.11 Kim's controller wanted to know the Rs of the two projects, what would you tell him? 1. There are multiple IRR's for each project II. The IRR of each project is negative and therefore not all for decision-making III. The TR cannot be calculated because the cash flows are one sign. A change of won would be needed in order to calculate the TRR. TV. The TRR Carnot be calculated because the cash rows are in the form of an annuity V. The TRR of each project will be positive at a lower WACC -Select c. If the WACC roseto 12% would the affect your recommendation L When the WACC increases to 12 NPV of costs are now lower for HCC than IL When the WACC increases to 129, the TR for is greater than the IRR for HCCLCC would be chosen When the WACC increases to 12 IRR for HCC is ter than the RTO , HOC would be con IV. Since all of the cash rows are native the NPV negative and we do not accet any ct that has a negative NPV V. When the WACC increases to 12 NPV costs are now lower for LCC than HCO Click here to read the eBook: Internal Rate of Return (AR) IRR Project costs $52,869.94, its expected cash inflows are $11,000 per year for 10 years, and its WACC IS 12. What is the project's TRA? Round your answer to two decimal places