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My assignment is to calculate net present value and determine whether a project should go forward. I have been
My assignment is to calculate net present value and determine whether a project should go forward. I have been
given the cost of needed equipment, the rate at which I can borrow money from the bank, gross revenues and the expected cash outflows. I was also given a discount rate of 6% and an interest rate of 3% on funds borrowed.
I initially used the gross revenue amounts provided, but then thought that I should subtract the operational costs and the interest payments, then use that total cash amount to figure out the NPV. I now have two different numbers and I'm not sure which to use. Since the interest rates and the expected cash outflows were included, it seems I should go with that. What would your opinion be on the situation?
