Question: Highland Log grows and harvests timber for the construction industry. WV Log Homes designs and produces log home kits that are ready for delivery to

Highland Log grows and harvests timber for the construction industry. WV Log Homes designs and produces log home kits that are ready for delivery to a new home site. Highland Log has a cost of capital of 11 percent while WV Log Homes cost of capital is 14 percent. Both Highland Log and WV Log Homes are considering expanding into the design and production of log barn kits. The initial cost of the expansion project is $156,000 and the projected cash inflows are $45,000 a year for 5 years. Which firm, or firms, if either, should expand into the log barn kits?

a. Highland Log only

b. WV Log Homes only

c. both Highland Log and WV Log Homes

d. neither Highland Log nor WV Log Homes

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