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% O Font Number Cells Editing CH H A. Conditional Formatting Format as Table Clipboard Alignment Cell Styles Office Update To keep up-to-date with security

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% O Font Number Cells Editing CH H A. Conditional Formatting Format as Table Clipboard Alignment Cell Styles Office Update To keep up-to-date with security updates, fixes, and improvement... A42 4 x fx A B D E F G 1 P11.14 CHOOSING MANDATORY PROJECTS ON THE BASIS OF 2 LEAST COST Kim Inc. must install a new air conditioning unit in 3 its main plant. Kim must install one or the other of the units; 4 otherwise, the highly profitable plant would have to shut down. 5 Two units are available, HCC and LCC (for high and low capital 6 costs, respectively). HCC has a high capital cost but relatively 7 low operating costs, while LCC has a low capital cost but higher 8 operating costs because it uses more electricity. The costs of 9 the units are shown here. 10 5 4 -55 -180 5 -55 -180 11 Kim's WACC is 12.00% 12 Units are in $1,000. 13 14 Time 0 1 2 3 15 HCC -610 -55 -55 -55 16 LCC -110 - 180 -180 -180 17 18 a. Which unit would you recommend? Why? 19 20 21 22 P11.14 P11.19 P12.6 P12.7 + E1 Ready Styles CO Bates 1 H Office Update To keep up-to-date with security updates, fixes, and improvement... A42 x fx A B D E F G 29 30 31 32 33 34 b. What are the IRRs of the projects? 35 36 37 38 39 c. If the WACC rose to 15%, would this affect your 40 recommendation? Whyer why not? Explain briefly. 41 42 43 44 45 46 47 48 49 50 51 P11.14 P11.19 P12.6 P12.7 + ny Ready

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