Business, 11.12.2019 04:31, bear342

Assuming you will obtain a bank loan of 65% of the initial cost at an interest rate of 7.00% per year. the loan requires interest payment only at end of each year and the loan principle is due at end of the 10th year (like a bond arrangement). everything else stays the same as part 1 except interest expenses are tax deductible. re-calculate everything as you did in part 1. based on the result of part 2 and an incremental irr analysis, make your recommendation as which way, either part 1 or part 2, to do the project and explain how does financial leverage affect your decision in relation to the selection of this project?

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Assuming you will obtain a bank loan of 65% of the initial cost at an interest rate of 7.00% per yea...