1.1 Project: SuperTread Tire BrandABC Tires has recently developed a new tyre, the Supertread. Managers and CFOs (Mr George Lee) need to determine whether it is profitable for the company to make the investments necessary to produce and market it. A report has been prepared analyzing Mr Lee's concerns regarding the company's proposed new project.1.2 Financial Decisions within ABCInvestment decisions have important consequences for the future development of a company, in this case ABC Tyres. Evaluating a project under conditions of uncertainty can be an extremely complex task. Uncertain future events that could affect the entire economy, a company or a project, lead to variable cash flows, which have different values ​​from those expected under certain conditions, in a deterministic environment (Bruner et al, 1998). Given the enormous annual spending on capital projects and corporate acquisitions, wisely selecting discount rates is of paramount importance for financial managers like Lee. The estimate of the discount rate is always a point of reference in every evaluation process. The evaluation of cash flows follows a precise scheme. All we need to do is focus only on the required items in the free cash flow model. Things become more complicated when evaluating discount rates, because there are many evaluation models, some of them are not refined but highly contested, and some of them are complex but are not preferred by users (Brigham et al, 1990). The choice of a model for estimating the discount rate depends on the information available and Mr. Lee's reasons and preferences. to decide which value is relevant and will lead to the most accurate results and decisions. In most cases, the weights to be assigned to different types of capital will be clearly different if Mr. Lee chooses to apply current market values ​​as opposed to the stated values ​​found in Goodyear Tires' balance sheet. In this case, Lee is interested in determining a “criterion” against which to compare expected returns from future investments in ABC tires (Rappaport et al, 2001). This is the most common use of the cost of capital and therefore current market value weights should generally be used. This is because the cost of capital incorporates the expected returns of both debt holders and shareholders, as both groups are entitled to free cash flows.