.Suppose you are working as Finance Manager for ACI Group. Already the Group has taken…

.Suppose you are working as Finance Manager for ACI Group. Already the Group has taken significant debt, and the ACI group is evaluating the investment proposal. ACI is considering investing in either medicine or cement project. Medicine Project has a project life of 5 years, and the Cement Project has a project life of 6 years. Both the projects will require an initial investment of $10,000. At the end of year 5, ACI estimates that Medicine Project can be sold to a net $1,700, and at the end of year six, Cement Project can be sold to a net of $1,900. For Medicine Project, the cash flows over the project’s five-year life will be $2,200 in the first two years, $4,000 in the next two, and $5,000 in the last year. For Cement Project, the cash flows over the six-year life of the project will be $2,500 in the first two years, $3,500 in the next two, and $5,000 in the last two years. Although the Medicine Project has an average risk, ACI feels that Cement Project is considerably riskier. The cyclical nature of the business, the uncertainty of clinker prices, technology, environment, and slow pace of liberalization can affect the ACI group’s cement business. Therefore, their team decides that ACI should use a discount rate of 11% for the Medicine Project and a 1% additional discount rate for the Cement Project. What will be your recommendation for ACI? If they have to select just one project, which particular project should be selected? Show detailed calculation process. 3 (Including one bonus mark)