If a project costs $100,000 and is expected to return $105,000 in a year and if the interest rate is 6%, then the company will want to take out a loan to undertake the project.

Question

Quizplus · Accepted Answer

The project has a positive net present value (NPV) of $5,000 but since it is positive, the company does not need to take out a loan to undertake the project. They can finance it through their own funds.

If a Project Costs $100,000 and Is Expected to Return