Gold Corporation performed a treasury analysis this year and determined that it had $150,000 to invest into a new project this year. After much consideration, Gold narrowed down options to 2 mutually exclusive projects, A and B. Information on Projects A and B are below:
Project A Project B
Initial investment $150,000 (fixed cost) $150,000 (fixed cost)
Units to sell 5,000 8,500
Sales price per unit $100 $150
Variable costs per unit $35 $70
Project A will result in tax free income, while Project B's income will be taxed at 25%. Which project should Gold Corporation choose and why?