thanks will upvote!!

Ch 11: End-of-Chapter Problems - The Basics of Capital Budgeting Kom 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, HOC 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 5.5%. 3 HCC LCC -$600,000 -$45.000 -$45,000 -$45,000 -$45,000 -$45,000 -$90,000 -$175,000 -$175,000 -$175,000 -$175,000 -$175,000 a. Which unit would you recommend? L. 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. 11. Since all of the cash flows are negative, the NPV's cannot be calculated and an alternative method must be employed Since all of the cash flows are negative, the NPV's will be negative and we do not accept any project that has a negative NPV. TV. Since we are examining costs, the unit chosen would be the one that had the lower NPV of costs. Since LCCs NPV of costs is lower than HCC, LCC would be chosen. V. Since we are examining costs, the unit chosen would be the one that had the lower NPV of costs. Since HOCH NPV of costs is lower than LCC, HCC would be chosen b. Kom's controller wanted to know the IRR of the two projects, what would you tell him? 1. The IRR of each project will be positive at a lower WACC. 11. There are multiple IRR's for each project. II. The IRR of each project is negative and therefore not useful for decision making TV. The I cannot be calculated because the cash rows are alone wign. A change of sign would be needed in order to calculate the IRR. V. The IRR cannot be calculated because the cash flows are in the form of an annuity che WACC roweto 11% would this affect your recommendation? 1. Since all of the cash flows are negative, the NPV's will be negative and we do not accept any project that has a negative NPV. 11. When the WACC increases to 114, the NPV of costs are now lower for LCC than HCC. II. When the WACC increases to 11%, the NPV of costs are now lower for HOC than LCC. IV. When the WACC increases to 11%, the IRR for LCC is greater than the IRR for HCC, LOC would be chosen V. When the WACC increases to 11%, the IRR for HCC is greater than the IRR for LCC, HCC would be chosen Explain your answer and the reason this result occurred 1. The reason is that when you discount at a higher rate you are making negative is higher and this lower the NPV. II. The reason is that when you discount at a higher rate you are making negative is smaller and this lowers the NPV. III. The reason is that when you discount at a higher rate you are making negative O's smaller thus improving the NPV. IV. The reason is that when you discount at a higher rate you are making negative Os higher thus improving the IRR V. The reason is that when you discount at a higher rate you are making negative of higher thus proving the NPV