Question
Given: Sunny Corp. is looking into building a project that has the following characteristics: - it is a new area of business for
Given:
Sunny Corp. is looking into building a project that has the following characteristics:
- it is a new area of business for Sunny Corp.
-upfront cost is $1,000,000
-$100,000 of revenue for fifteen years comes from the project
-A $1,250,000 loan is available and it has a 5% interest rate. The loan will be paid off in ten years, in one lump sum
Required:
State if Sunny should pursue this new investment opportunity based on WACC and APV. Is APV or NPV best used in this situation?
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Financial Theory and Corporate Policy
Authors: Thomas E. Copeland, J. Fred Weston, Kuldeep Shastri
4th edition
321127218, 978-0321179548, 321179544, 978-0321127211
