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Consider investment project with projected CFs in the table below. Assuming appropriate discount rate of 10% (all equity financed), would you recommend this investment based
Consider investment project with projected CFs in the table below. Assuming appropriate discount rate of 10% (all equity financed), would you recommend this investment based on NPV and IRR metrics? How these metrics would change if 50% debt financing were used? Cost of debt is 5%, assume to tax shield for the CFs. (Hint: find leveraged NPV and IRR).
| Year 0 | Year 1 | Year 2 | Year3 | Year 4 | Year 5 |
CFs | -100 | 15 | 20 | 5 | 100 | 230 |
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