You have come across a project which has an initial investment of INR 5 crores. The EBIT expected from this project is INR 1 crore in perpetuity, a more stable project with more predictability in the cash flows. Project risk is similar to the business risk of the firm's core operations. The opportunity cost of capital to the firm if it was an all equity financed firm is 14.5%. The tax rate is 30%. Would you choose this project ?

Now you have been told that the initial investment can be financed for a period of 4 years with a INR 5 crores debt (principal amount) at a rate of 9%. The principal amount of the debt will be paid back in 5 equal installments at the end of each year for the next 5 years. Will you change your decision about the project now ?