Gold Digging Enterprises and Metal Exploration, Inc. are separate firms that are

Question

Gold Digging Enterprises and Metal Exploration, Inc. are separate firms that are both considering a new silver exploration project. Gold Digging Enterprises is in the actual silver mining business and has an after-tax cost of capital of 12.8 percent. Metal Exploration, Inc. is in the precious gem retail business and has an after-tax cost of capital of 10.6 percent. The project under consideration has initial costs of $575,000 and anticipated annual cash inflows of $102,000 a year for ten years. Which firm(s), if either, should accept this project?
Answer

Gold Digging Enterprises only

Metal Exploration, Inc. only

both Gold Digging Enterprises and Metal Exploration, Inc.

neither Gold Digging Enterprises nor Metal Exploration, Inc.

cannot be determined without further information

Explanation / Answer

both Gold Digging Enterprises and Metal Exploration, Inc.

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