You are the manager at K&B Inc. You have been told that the company has an opportunity to expand into a new market, but will need to make a major investment to do it. Sara Harris, Division Vice-President, ask you to evaluate the different opportunities and complete a report for her including your recommendation on which expansions to do (using the methods discussed in the course for capital budgeting). The table below contains the information for each project. Assume all the information given to you is accurate and all three expansions have the same risk.

Options for capital structure (determine the WACC and choose the best capital structure for the project):

1.35% debt at 10% with tax-rate of 40%; no preferred stock; 65% common stock at 15% or

2.50% debt at 11% with tax-rate of 40%; no preferred stock; 50% common stock at 15%.

Total available funds the company can raise for the expansion(s) is $10,000,000.

The expansions cash flows are as follows:

Expansion	Florida	Georgia	Alabama
Initial Cost	-10,000,000	-10,000,000	-10,000,000
Year 1 Cash Flow	1,690,000	3,850,000	0
Year 2 Cash Flow	1,690,000	3,000,000	0
Year 3 Cash Flow	1,690,000	2,500,000	725,000
Year 4 Cash Flow	1,690,000	2,000,000	800,000
Year 5 Cash Flow	1,690,000	1,000,000	900,000
Year 6 Cash Flow	1,690,000	700,000	2,000,000
Year 7 Cash Flow	1,690,000	0	3,000,000
Year 8 Cash Flow	1,690,000	0	4,000,000
Year 9 Cash Flow	1,690,000	0	5,000,000
Year 10 Cash Flow	1,690,000	0	6,000,000

After your evaluation, write a memo (in word) to Sara Harris indicating your recommendation. In the memo, you should indicate the rank of the projects, which projects are viable, then you should indicate which project(s) you recommend.