Q 13.5. Rework the example (income statement, cash-flow statement excerpts, cash flows, and NPV) with the following parameters:

Assume that debt does not require any interest payment in the first year (the first payment of $8 occurs in the second year). The world is risk neutral, because the debt and the project require the same expected rate of return (cost of capital).

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Project Available Financing-Executed Real Physical Lifespan Cost Gross Output - Input Costs - Selling Costs = Net Output 5 years Debt Capacity $100 $120, Y1 Debt Interest Rate 8%/year $80/year $6/year Accounting Treatment $8/year Depreciation Method Linear $66/year Accounting Life 4 years Overall Cost of Capital 8%/year Corporate Tax Rate (+) 50%/year