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As a small business owner you have decided to expand your operation. This expansion will require a rather large initial investment, and you are considering

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As a small business owner you have decided to expand your operation. This expansion will require a rather large initial investment, and you are considering whether to finance this investment completely from the business's cash reserves (equity), or to partially finance the investment using a loan from the local bank. Using the information provided below, discuss which option (financing with cash, or using the loan) would result in the larger NPV for the project. Briefly explain/justify your answer (2-3 sentences). 10% 10% Discount Rate Loan Interest Rate Marginal Tax Rate 25%

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