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Which of project alternatives should be chosen by company

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Assignment

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 company's 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?

Reference no: EM131519373

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