Question
The board members of Felicia & Fred are strategically evaluating the prospects of fulfilling increasing demand for its products and reaching new consumers. You have
The board members of Felicia & Fred are strategically evaluating the prospects of fulfilling increasing demand for its products and reaching new consumers. You have recently evaluated the expansion of manufacturing facilities for Felicia & Fred, entailing two alternative projects: customizing and refurbishing a large former mill building; versus building a new facility after razing the old structure, which currently exists on the proposed site. Below is a table summarizing your findings:
| Project Strategy | NPV | IRR |
| Refurbish | $450,000 | 14% |
| Build New | $350,000 | 16% |
The companys WACC is currently 10%. Which of the project alternatives should be chosen by the company? Which decision rule should be the basis of decision making when the outcomes conflict?
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Personal Finance Turning Money into Wealth
Authors: Arthur J. Keown
8th edition
134730364, 978-0134730363
