LG2 F12-12 Break-even cash inflows and risk Boandman Casses and Chemicals is a supplier of highly purified gases to semiconductor manufacturers. A large chip producer has asked Boardman to build a new gas production facility close to an existing semiconductor plant. Once the new gas: plant is in place, Basdman will be the exclusive supplier for that semioonductor fabrication plant for the subsequent 10 years. Boardman is considering one of two plant designs. The first is for Boardman's "standard" plant, which will cost $38.5 million to build. The second is for a "cusstom" plant, which will cost $53.5 million to build. The custom plant will allow Blandman to puoduce the highly specialized gases required for an emerging semiconductor manufacturing processs. Boardman estimates that a standard plant will generate free cash flows of $12.5 millian per year, but if the custom design is put in place, Boardman expects so produce $17.5 million in cast flaw annually. Bosrdman has enough money to build either type of p lant, and, in the absence of riek differences, accepts the project with the highest NPV. The cost of capital is 16.9\%h. a. Find the NPV for each project. Are the projects acceptable? b. Find the break-even tree cash tlow far each project. C. The firm has estimated the probabilities of achicving various ranges of free cash flow for the two projects as shown in the following table. What is the probability that each project will achieve at least the break-even free cash flow found in part b ? d. Which project is more risky? Which project has the potentially higher NPV? Discuss the zistsretarn tratedfiti af the two projects. Which wasld you recommend if the goal were to achicve a taigher NPV