Which decision rule should be the basis of decision making

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Reference no: EM131928003

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?

Reference no: EM131928003

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