Reference no: EM132017903

Fairfax Pizza is evaluating a 1-year project that would involve an initial investment in equipment of 34,300 dollars and an expected cash flow of 36,300 dollars in 1 year. The project has a cost of capital of 4.44 percent and an internal rate of return of 5.83 percent. If Fairfax Pizza were to use 34,300 dollars in cash from its bank account to purchase the equipment, the net present value of the project would be 458 dollars. However, Fairfax Pizza has no cash in its bank account, so using money from its account is not possible. Therefore, the firm would need to borrow money to raise the 34,300 dollars. If Fairfax Pizza were to borrow money to raise the 34,300 dollars, the interest rate on the loan would be 0.32 percent. Fairfax Pizza would receive 34,300 dollars from the bank at the start of the project and would pay 34,410 dollars to the bank in 1 year. What is the NPV of the project?