Premium Company has a required rate of return (cost of capital) of 15%. For the current year, the firm made $250,000 in profit using average net assets of $1,000,000. The firm has an opportunity to invest in two projects. Project A has an ROI of 12% and contributes $10,000 to profit next year. Project B has an ROI of 18% and contributes $15,000 to profit next year.

Required:

a. From the perspective of maximizing the firm's long-run value, should Premium invest in Project A and/or Project B?

b. Suppose Premium's managers are evaluated based on profits earned. Will they be inclined to accept Project A and/or Project B?