QUESTION $1$ BPM Ltd$.$ has the following capital structure: $40\%$ debt and $60\%$ equity. The cost of retained earnings is $13\%,$ and the cost of new common stock is $16\%.$ BPM will not have any retained earnings available in the upcoming year. Its before tax cost of debt is $8\%,$ and its corporate tax rate is $40\%.$ BPM is considering between two mutually exclusive projects that have the following cash flows: Today Year $1$ Year $2$ Year $3$ Project A Cost $=100$ million$+50$ million$+30$ million$+50$ million Project B Cost $=150$ million$+50$ million$+60$ million$+80$ million Which project should BPM choose? Project A since its NPV is $$16$ million. Project A since its net present value $($NPV$)$ is $+$$$5\mathrm{.}01$ million. $4$ Project B since its NPV is $$22$ million.