FIN 320 Project Two Financial Assumptions: When a business needs to invest, its important to look at financial options. This is true for simple purchases, such as a new piece of equipment. And it is true for complex purchases, such as a new business. Business leaders must estimate cash flows from an investment and use the net present value (NPV) method to figure out if the investment is worthwhile.

Financial Option Scenario: Lease of $25 Million in Equipment Rationale for investment: The businesss current equipment is efficient, but it uses a lot of electricity. The production line also creates significant waste material, including waste plastics. The business is looking into leasing newer, more environmentally friendly equipment that will still allow it to be at least as efficient in production as it is now. Assumptions to consider: Annual cash flows generated with equipment: $4 million Discount rate is 12% 15-year useful life No salvage value

Initial Investment $25,000,000, Annual Cash Inflows $4,000,000, Number of Years 15, Salvage Value $0, Discount Rate 12%: NPV = $2,243,458

Capital Equipment: Discuss the risks and benefits of the business investing in capital equipment. Include the necessary ethical factors, appropriate calculations, and examples to support your analysis.