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Imagine that you are the financial manager for a firm, and your company has a WACC of 4.5%. Two district managers would like funds to pursue a project, and are asking for your approval based on their projected financials.
Project A costs $180,000 today, and will give the company $25,000 profit per year for the next 15 years.
Project B costs $275,000 today, and will give the company $30,000 profit per year for the next 20 years.
If the discount rate is 4.5%, which project would you pursue? Why?