ALL INSTRUCTIONS HAS TO BE FOLLOWED AND ALL QUESTIONS ANSWERED IN AT LEAST 2 PARAGRAPHS
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?