An initial investment of 1 billion, will generate $500,000 in free cash flows for 25 years. Determine if I should invest in the project? then going a step further if the project is financed by issuing debt and using tax shields of 20% but also having to raise debt with a cost of capital at 2% with a fixed D/E ratio of 1.5 for life of project, what is the add value debt the financing will generate?

Answer rating: 100% (QA)

To determine whether the project is worth investing in we need to calculate its net present value NPV using the formula NPV PV of Cash Flows Initial I... View the full answer