Question: You have come across a project which has an initial investment ofINR5 crores. The EBIT expected from this project is INR 1 crore in perpetuity,

You have come across a project which has an initial investment ofINR5 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 firms 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 ?

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