Kim Inc. must install a new air$-$conditioning unit in its main plant. Kim must install one or the other of the units; otherwise, the highly profitable plant would have to shut down. Two units are available, HCC and LCC $($for high and low capital costs, respectively$).$ HCC has a high capital cost but relatively low operating costs, while LCC has a low capital cost but higher operating costs because it uses more electricity. The costs of the units are shown here. Kim's WACC is $7\mathrm{.}5\%.$

$012345$

HCC $-$$$590,000-$$$55,000-$$$55,000-$$$55,000-$$$55,000-$$$55,000$

LCC $-$$$100,000-$$$180,000-$$$180,000-$$$180,000-$$$180,000-$$$180,000$

Which unit would you recommend?

Since all of the cash flows are negative, the IRR's will be negative and we do not accept any project that has a negative IRR.

Since all of the cash flows are negative, the NPV$\text{'}$s cannot be calculated and an alternative method must be employed.

Since all of the cash flows are negative, the NPV$\text{'}$s will be negative and we do not accept any project that has a negative NPV$.$

Since we are examining costs, the unit chosen would be the one that had the lower NPV of costs. Since LCC$\text{'}$s NPV of costs is lower than HCC$\text{'}$s$,$ LCC would be chosen.

Since we are examining costs, the unit chosen would be the one that had the lower NPV of costs. Since HCC$\text{'}$s NPV of costs is lower than LCC$\text{'}$s$,$ HCC would be chosen.