Question
How would you as a financial advisor report to the CEO in assessing the choice of investment and funding if the Company A's NPV is
How would you as a financial advisor report to the CEO in assessing the choice of investment and funding if the Company A's NPV is (2000) while Company B's NPV is 1000. The following information are available. Company A has a cash reserve of 6M.Capital cost will be funded thru a 20-year commercial mortgage with land as a collateral. The Interest rate is fixed at 10% payable per annum. While Company B has a 15-year commercial loan taken out in Italy at 11% p.a. interest repayable at the end of the term. How would you evaluate, the choice of discount rate used in evaluation and what are the real option implied in the two investment?
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