Question
Consider a project lasting 1 year only. The initial outlay is $1000 and the expected inflow is $1200. The opportunity cost of capital is ra=20%.
Consider a project lasting 1 year only. The initial outlay is $1000 and the expected inflow is $1200. The opportunity cost of capital is ra=20%. The borrowing rate is rd=10%, and the net tax shield per dollar of interest is T*=.20.
A.) What is the projects base case NPV? (show work)
B.) What is its APV if the firm borrows 30% of the projects required investment? (show work)
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International Financial Reporting A Practical Guide
Authors: Alan Melville
6th edition
1292200743, 1292200766, 9781292200767, 978-1292200743
