Question: Given: Sunny Corp. is looking into building a project that has the following characteristics: - it is a new area of business for

Given:

 

Sunny Corp. is looking into building a project that has the following characteristics:

 

- it is a new area of business for Sunny Corp.

-upfront cost is $1,000,000 

-$100,000 of revenue for fifteen years comes from the project

-A $1,250,000 loan is available and it has a 5% interest rate. The loan will be paid off in ten years, in one lump sum

 

Required:

 

State if Sunny should pursue this new investment opportunity based on WACC and APV.  Is APV or NPV best used in this situation?

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