Machine as the initial outlay or the amount paid with cash

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Reference no: EM131998019

1. If you purchased an equipment paying 60% cash and the balance with a loan, when calculating the NPV and FCF do you use the value of the machine as the initial outlay or the amount paid with cash?

2. A project will require investment outlays of $120 at time 0 and $100 at time 1 and is expected to produce returns of $100 per year in years 1 though 3. The risk-free rate is 5% and the appropriate risky rate is 20%. Is the project worth pursuing?

Reference no: EM131998019

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