Which product should the cfo choose

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Reference no: EM131955749

Question: The Chief Finance Officer (CFO) of BioCom Inc. needs to select one of the product lines from two mentioned below. (all figures are in thousands of dollars).

Time of Cash Flow	Nano Test Tubes	Microsurgery Kit
Investment	-$11,000	-$11,000
Year 1	2,000	4,000
Year 2	3,000	4,000
Year 3	4,000	4,000
Year 4	5,000	4,000
Year 5	7,000	4,000

The CFO knows that BloCom has cost of capital as follows: debt (7.6%), Preferred Stock (10.53%), Common Stock (11.36%). The current tax-rate is 30% and Capital Structure is: debt (0.38), Preferred Stock (0.14), and Common Stock (0.48). Which product should the CFO choose if financial and technological risks were the same for both products?

Reference no: EM131955749

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