SOUTH EASTERN UNIVERSITY OF SRI LANKA

FACULTY OF APPLIED SCIENCES

DEPARTMENT OF BIOLOGICAL SCIENCES

Degree Program: Bachelor of Bio Science/ Bachelor of Physical Science

Academic Year : 2020/2021, 2nd Year, Semester: II

Course : PAE 22232 - Project Analysis
Course Lecturer : Prof. A. Jahfer (Dept. Accountancy and Finance, FMC, SEUSL)
Hand out No : Project Financial Analysis: principles and methods
Date: May 22, 2024

1
 LEARNING OBJECTIVES
• Understand the nature and importance of investment decisions
• Describe the non-DCF evaluation criteria: payback and
accounting rate of return.
• Explain the methods of calculating net present value (NPV)
and internal rate of return (IRR)
• Show the implications of net present value (NPV) and
internal rate of return (IRR)
• Illustrate the computation of MIRR

2
 Nature of Investment Decisions
• The investment decisions of a firm are generally known as the
capital budgeting, or capital expenditure decisions.

• The firm’s investment decisions would generally include expansion,

acquisition, modernisation and replacement of the long-term
assets. Sale of a division or business is also as an investment
decision.

• Decisions like the change in the methods of sales distribution, or

an advertisement campaign or a research and development
programme have long-term implications for the firm’s expenditures
and benefits, and therefore, they should also be evaluated as
investment decisions.

3
Features of Investment Decisions
• The exchange of current funds for future
benefits.

• The funds are invested in long-term assets.

• The future benefits will occur to the firm over

a series of years.

4
 Types of Investment Decisions
• One classification is as follows:
– Expansion of existing business
– Expansion of new business
– Replacement and modernisation
• Yet another useful way to classify investments
is as follows:
– Mutually exclusive investments
– Independent investments
– Contingent investments

5
 Investment Evaluation Criteria
• Three steps are involved in the evaluation of
an investment:
1. Estimation of cash flows
2. Estimation of the required rate of return (the
opportunity cost of capital)
3. Application of a decision rule for making the
choice

6
 Investment Decision Rule
• It should maximise the shareholders’ wealth.
• It should consider all cash flows to determine the true
profitability of the project.
• It should provide for an objective and unambiguous way of
separating good projects from bad projects.
• It should help ranking of projects according to their true
profitability.
• It should recognise the fact that bigger cash flows are preferable to
smaller ones and early cash flows are preferable to later ones.
• It should help to choose among mutually exclusive projects that
project which maximises the shareholders’ wealth.
• It should be a criterion which is applicable to any conceivable
investment project independent of others.
7
 DETERMINING CASH FLOWS FOR INVESTMENT
ANALYSIS

• Sound investment decisions should be based

on the net present value (NPV) rule.

• Problems to be resolved in applying the NPV

rule
– What should be discounted? In theory, the
answer is: We should always discount cash flows.
– What rate should be used to discount cash flows?
In principle, the opportunity cost of capital should
be used as the discount rate.
8
 CASH FLOWS VERSUS PROFIT
• Cash flow is not the same thing as profit, at
least, for two reasons.
– First, profit, as measured by an accountant, is based on
accrual concept.

– Second, for computing profit, expenditures are arbitrarily

divided into revenue and capital expenditures.
CF (REV  EXP  DEP)  DEP  CAPEX
CF Profit  DEP  CAPEX

9
 INCREMENTAL CASH FLOWS
• Every investment involves a comparison of alternatives:

– When the incremental cash flows for an investment are

calculated by comparing with a hypothetical zero-cash-
flow project, we call them absolute cash flows.
– The incremental cash flows found out by comparison
between two real alternatives can be called relative cash
flows.

• The principle of incremental cash flows assumes greater

importance in the case of replacement decisions.

10
 Example 1
• Suppose a firm is considering replacing an equipment at book
value of Rs. 5000 and market value of Rs. 3000. New
equipment will require an initial cash outlay of Rs 10,000, and
is estimated to generate cash flows of Rs 8,000, Rs 7,000 and Rs
4,500 for the next 3 years.
• The book value of old machine is a sunk cost. Market value is
opportunity cost.
• Thus, on an incremental basis the net cash outflow of new
equipment is: Rs 10,000 – Rs 3,000 = Rs 7,000.
• Also, The differences of the cash flows of new equipment over
the cash flows of old equipment are incremental cash flows.

11
 COMPONENTS OF CASH FLOWS
• Initial Investment
• Net Cash Flows
– Depreciation and Taxes
– Net Working Capital
• Change in accounts receivable
• Change in inventory
• Change in accounts payable
– Free Cash Flows
• Terminal Cash Flows
– Salvage Value
• Salvage value of the new asset
• Salvage value of the existing asset now
• Salvage value of the existing asset at the end of its normal
• Tax effect of salvage value
– Release of Net Working Capital

12
 Initial Investment

• Initial investment is the net cash outlay in the period

in which an asset is purchased.
• A major element of the initial investment is gross
outlay or original value (OV) of the asset, which
comprises of its cost (including accessories and
spare parts) and freight and installation charges.
• Original value is included in the existing block of
assets for computing annual depreciation.

13
 Net Cash Flows
• Consist of annual cash flows occurring from the operation of
an investment, but it is also be affected by changes in net
working capital and capital expenditures during the life of the
investment.
Net cash flow = Revenues - Expenses - Taxes
NCF = REV - EXP - TAX
• The computation of the after-tax cash flows requires a careful
treatment of non-cash expense items such as depreciation.
• Depreciation, calculated as per the income tax rules
influences cash flows indirectly by way of depreciation tax
shield.

14
 Example
• Consider the following statement
• Sales 300,000
• Variable costs (175,000)
• Fixed cost (24,000)
• Depreciation (75,000)
• EBIT 26,000
• Taxes 34% ( 8,840)
• Net income 17,160

• Calculate operating cash flow. = 17,160+75,000=92160

 Net Working Capital

• It is the difference between change in current

assets (e.g., receivable and inventory) and
change in current liabilities (e.g., accounts
payable) to profit.
• Increase in net working capital should be
subtracted from and decrease added to after-
tax operating profit.
NCF = EBIT (1 - T ) + DEP - NWC

16
 Terminal Cash Flow: Salvage Value
• Salvage value is a terminal cash flow.
• Salvage value may be defined as the market
price of an investment at the time of its sale.
• No immediate tax liability (or tax savings)
arises on the sale of an asset because the
value of the asset sold is adjusted in the
depreciable base of assets.

17
 Cash Flow Estimates for New Products

• It depends on forecasts of sales and operating

expenses.
• Sales forecasts require information on the
quantity of sales and the price of the product.
• Anticipation of the competitors’ reactions.

18
 Cash Flow Estimates for Replacement Decisions

• The initial investment of the new machine will

be reduced by the cash proceeds from the
sale of the existing machine.
• The annual cash flows are found on
incremental basis.
• The incremental cash proceeds from salvage
value is considered.

19
 Evaluation Criteria

– Payback Period (PB)

– Discounted payback period (DPB)
– Accounting Rate of Return (ARR)
– Net Present Value (NPV)
– Internal Rate of Return (IRR)
– Modified Internal Rate of Return (MIRR)
– Profitability Index (PI)

20
 PAYBACK
• Payback is the number of years required to recover the
original cash outlay invested in a project.
• If the project generates constant annual cash inflows, the
payback period can be computed by dividing cash outlay by
the annual cash inflow. That is:
Initial Investment C0
Payback = 
Annual Cash Inflow C

21
 Example
• Assume that a project requires an outlay of Rs
50,000 and yields annual cash inflow of Rs
12,500 for 7 years. The payback period for the
project is:
Rs 50,000
PB  4 years
Rs 12,500

22
 PAYBACK
• Unequal cash flows In case of unequal cash inflows, the
payback period can be found out by adding up the cash
inflows until the total is equal to the initial cash outlay.
• Suppose that a project requires a cash outlay of Rs 20,000,
and generates cash inflows of Rs 8,000; Rs 7,000; Rs 4,000;
and Rs 3,000 during the next 4 years. What is the project’s
payback?
3 years + 12 × (1,000/3,000) months
3 years + 4 months

23
 DISCOUNTED PAYBACK PERIOD

• The discounted payback period is the number of periods

taken in recovering the investment outlay on the present
value basis.
• The discounted payback period still fails to consider the
cash flows occurring after the payback period.

24
ACCOUNTING RATE OF RETURN METHOD

• The accounting rate of return is the ratio of the average after-

tax profit divided by the average investment. The average
investment would be equal to half of the original investment
if it were depreciated constantly.
or

• A variation of the ARR method is to divide average earnings

after taxes by the original cost of the project instead of the
average cost.

25
 Example
• A project will cost Rs 40,000. Its stream of earnings
before depreciation, interest and taxes (EBDIT)
during first year through five years is expected to be
Rs 10,000, Rs 12,000, Rs 14,000, Rs 16,000 and Rs
20,000. Assume a 50 per cent tax rate and
depreciation on straight-line basis.

26
Calculation of Accounting Rate of Return

27
 Acceptance Rule
• This method will accept all those projects
whose ARR is higher than the minimum rate
established by the management and reject
those projects which have ARR less than the
minimum rate.

• This method would rank a project as number

one if it has highest ARR and lowest rank
would be assigned to the project with lowest
ARR.
28
 Evaluation of ARR Method

• The ARR method may claim some merits

Simplicity
Accounting data
Accounting profitability
• Serious shortcomings
Cash flows ignored
Time value ignored
Arbitrary cut-off

29
 Net Present Value Method
• Cash flows of the investment project should be forecasted
based on realistic assumptions.
• Appropriate discount rate should be identified to discount the
forecasted cash flows.
• Present value of cash flows should be calculated using the
opportunity cost of capital as the discount rate.
• Net present value should be found out by subtracting present
value of cash outflows from present value of cash inflows. The
project should be accepted if NPV is positive (i.e., NPV > 0).

30
 Net Present Value Method

• The formula for the net present value can be

written as follows:
 C1 C2 C3 Cn 
NPV   2
 3
 n   C0
 (1  k ) (1  k ) (1  k ) (1  k ) 
n
Ct
NPV  t
 C0
t 1 (1  k )

31
 Example
• Consider an investment which has the
following cash flows:
• Initial investment is 32,000/-

• Compute NPV at 14% Cost of capital/ discount

rate. Should this project be accepted or not?

32
 Evaluation of the NPV Method
• NPV is most acceptable investment rule for
the following reasons:
– Time value
– Measure of true profitability
– Value-additivity
– Shareholder value
• Limitations:
– Involved cash flow estimation
– Difficult to determine the discount rate
– Mutually exclusive projects
– Ranking of projects
33
 INTERNAL RATE OF RETURN METHOD

• The internal rate of return (IRR) is the rate that equates the
investment outlay with the present value of cash inflow
received after one period. This also implies that the rate of
return is the discount rate which makes NPV = 0.

34
 CALCULATION OF IRR
• Uneven Cash Flows: Calculating IRR by Trial and Error
– The approach is to select any discount rate to compute the present
value of cash inflows. If the calculated present value of the
expected cash inflow is lower than the present value of cash
outflows, a lower rate should be tried. On the other hand, a higher
value should be tried if the present value of inflows is higher than
the present value of outflows. This process will be repeated unless
the net present value becomes zero.

Example
A project costs Rs.16,000 and is expected to generate cash
inflows of Rs.8,000, Rs.7,000 and Rs.6,000 at the end of each
year for next three years.
Find the IRR.

35
Year Cash flow Rate 0 1 2 3 NPV
0 -16000 0% -16000 8000 7000 6000 5000.00
1 8000 5% -16000 8000 7000 6000 3151.28
2 7000 10% -16000 8000 7000 6000 1565.74
3 6000 15% -16000 8000 7000 6000 194.62
IRR 16% 20% -16000 8000 7000 6000 -1000.00

Rate NPV 6000

0% 5000 5000
5000
5% 3151
10% 1566 4000
15% 195 3151
20% -1000 3000

2000 1566

IRR 0.161014 1000

195
0
0% 5% 10% 15% 20%
-1000
-1000
DF PV -2000

36
 CALCULATION OF IRR
• Level Cash Flows
– Let us assume that an investment would cost Rs.20,000 and provide
annual cash inflow of Rs.5,430 for 6 years
– The IRR of the investment can be found out as follows

NPV  Rs 20,000 + Rs 5,430(PVAF6,r ) = 0

Rs 20,000 Rs 5,430(PVAF6,r )
Rs 20,000
PVAF6,r  3.683
Rs 5,430

• The rate, which gives a PVFA of 3.683 for 6 years. We find

this value under the 16% column in Table PVFA.

37
 NPV Profile and IRR
NPV Profile

38
 Acceptance Rule
• Accept the project when r > k

• Reject the project when r < k

• May accept the project when r = k

• In case of independent projects, IRR and NPV

rules will give the same results if the firm has
no shortage of funds.
39
 Evaluation of IRR Method
• IRR method has following merits:
Time value
Profitability measure
Acceptance rule
Shareholder value
• IRR method may suffer from
Multiple rates
Mutually exclusive projects
Value additivity

40
 NPV vs. IRR
• Conventional Independent Projects:
In case of conventional investments, which are
economically independent of each other, NPV and IRR
methods result in same accept-or-reject decision if the
firm is not constrained for funds in accepting all
profitable projects.

41
 NPV vs. IRR
•Lending and borrowing-type projects:
Project with initial outflow followed by inflows is a lending
type project, and project with initial inflow followed by
outflows is a borrowing type project, Both are conventional
projects.

42
 Problem of Multiple IRRs
• A project may have both
lending and borrowing
features together. IRR
method, when used to
evaluate such non-
conventional investment can
yield multiple internal rates of
return because of more than
one change of signs in cash
flows.
• Consider the following project
Period Cash flow
1 -1,000
2 4,000
3 -3,750
43
 Example
• Suppose we have a strip-mining project that requires a
Rs.6,000/- investment. The investment cash flow in the first
year will be Rs.15,500/-. In the second year, the mine will
be depleted, but we will have to spend Rs.10,000/- to
restore the terrain.

• Year Cash flow 0 -6,000

0 -6,000 1 15,500
2 -10,000
1 15,500
25%
2 -10,000
• Find the IRR.
44
 Case of Ranking Mutually Exclusive
Projects
• Investment projects are said to be mutually exclusive when
only one investment could be accepted and others would
have to be excluded.
• Two independent projects may also be mutually exclusive if a
financial constraint is imposed.
• The NPV and IRR rules give conflicting ranking to the projects
under the following conditions:
– The cash flow pattern of the projects may differ. That is, the cash
flows of one project may increase over time, while those of others
may decrease or vice-versa.
– The cash outlays of the projects may differ.
– The projects may have different expected lives.

45
 Timing of cash flows
The most commonly found condition for the conflict between
the NPV and IRR methods is the difference in the timing of cash
flows. Let us consider the following two Projects, M and N.

46
 Cont…

NPV Profiles of Projects M and N NPV versus IRR

The NPV profiles of two projects intersect at 10 per cent discount rate.
This is called Fisher’s intersection.
47
MODIFIED INTERNAL RATE OF RETURN (MIRR)

• The modified internal rate of return (MIRR) is the compound average

annual rate that is calculated with a reinvestment rate different than the
project’s IRR.

The procedure for calculating MIRR is as follows:

Step1: Calculate the present value of the costs associated with the project

Step2: Calculate the terminal value (TV) of the cash inflows expected from the
project

Step3: Obtain MIRR by solving the following equation

PVC = TV/ (1+MIRR)n

48
 Example

Consider the following data

Year 0 1 2 3 4 5 6
Cash flow -120 -80 20 60 80 100 120

The cost of capital is 15%

What is the MIRR?

49
 Profitability Index
• The objective of the NPV rule under capital constraint should be
to maximise NPV per rupee of capital rather than to maximise
NPV.
• Projects should be ranked by their profitability index, and top-
ranked projects should be undertaken until funds are exhausted.
• The Profitability Index does not always work. It fails in two
situations:
– Multi-period capital constraints.
– Project indivisibility.

• Limitations of Profitability Index

– Multi-period capital constraints
– Project indivisibility
50
 PROFITABILITY INDEX
• Profitability index is the ratio of the present
value of cash inflows, at the required rate of
return, to the initial cash outflow of the
investment.
• The formula for calculating benefit-cost ratio or
profitability index is as follows:

51
 PROFITABILITY INDEX
• The initial cash outlay of a project is Rs 100,000 and it can
generate cash inflow of Rs 40,000, Rs 30,000, Rs 50,000
and Rs 20,000 in year 1 through 4. Assume a 10 percent
rate of discount. The PV of cash inflows at 10 percent
discount rate is:

52
 Acceptance Rule
• The following are the PI acceptance rules:
– Accept the project when PI is greater than one.
PI > 1
– Reject the project when PI is less than one. PI < 1
– May accept the project when PI is equal to one.
PI = 1
• The project with positive NPV will have PI
greater than one. PI less than means that the
project’s NPV is negative.

53
 Evaluation of PI Method
• Time value:It recognises the time value of money.

• Value maximization: It is consistent with the shareholder

value maximisation principle. A project with PI greater than
one will have positive NPV and if accepted, it will increase
shareholders’ wealth.

• Relative profitability:In the PI method, since the present

value of cash inflows is divided by the initial cash outflow, it
is a relative measure of a project’s profitability.

• Like NPV method, PI criterion also requires calculation of

cash flows and estimate of the discount rate. In practice,
estimation of cash flows and discount rate pose problems.

54
Investment Decisions Under Capital Rationing

• Capital rationing refers to a situation where the firm is

constrained for external, or self-imposed, reasons to obtain
necessary funds to invest in all investment projects with
positive NPV.
• Under capital rationing, the management has to decide to
obtain that combination of the profitable projects which yields
highest NPV within the available funds.

55
 Why Capital Rationing?
• There are two types of capital rationing:

1. External capital rationing: imposed by capital markets

2. Internal capital rationing: self-imposed by the

company internally

56
 Profitability Index: Example
• The NPV and profitability index of the following four
projects are shown. Given the budget constraint of Rs 50,
projects M and N will be selected as per PI.

57
 Examples
• A company is considering the following six projects:
Project Cost (Rs.) NPV(Rs.)
A 1,000 210
B 6,000 1,560
C 5,000 850
D 2,000 260
E 2,500 500
F 500 95

You are required

a) to calculate the profitability index for each project and rank them.
b) Which project would you choose if the total available funds are
 Capital Rationing in Practice
• Capital rationing does not seem to be a serious
problem in practice.

• It may arise due to the internal constraint or the

management’s reluctance to raise external funds.

• When companies face the problem of shortage of

funds, they use simple rules of choosing projects
rather than the complicated mathematical models

59
 Investment Decisions Under Inflation
• Executives generally estimate cash flows assuming unit costs and selling
price prevailing in year zero to remain unchanged. They argue that if
there is inflation, prices can be increased to cover increasing costs;
therefore, the impact on the project’s profitability would be the same if
they assume rate of inflation to be zero.

• This line of argument, although seems to be convincing, is fallacious for

two reasons.
– First, the discount rate used for discounting cash flows is generally
expressed in nominal terms. It would be inappropriate and inconsistent to
use a nominal rate to discount constant cash flows.
– Second, selling prices and costs show different degrees of responsiveness to
inflation
• The depreciation tax shield remains unaffected by inflation since
depreciation is allowed on the book value of an asset, irrespective of its
replacement or market price, for tax purposes.

60
 Nominal VS. Real Rates of Return
• For a correct analysis, two alternatives are available:
– either the cash flows should be converted into nominal terms and then
discounted at the nominal required rate of return, or
– the discount rate should be converted into real terms and used to discount the
real cash flows

• Important: Discount nominal cash flows at nominal discount rate; or

discount real cash flows at real discount rate.

• Example: If a firm expects a 10 per cent real rate of return from an

investment project under consideration and the expected inflation rate is
7 per cent, the nominal required rate of return on the project would be:

61
• It would be inconsistent to discount the real cash flows of
the project by the nominal discount rate. For example, in
case of following cash flows discounting with 14%
nominal rate of real cash flows returns negative NPV:

• The cash flows should be discounted with real discount rate

as follows:
1.14
K= - 1 = 0.0654
1.07
62
 Example
• A company has the following projected cash flows estimated
in real terms:
• Year Real cash flows (Rs.)
• 1 -2500
• 2 800
• 3 110
• 4 750
• 5 500
• The nominal cost of capital is 15% and inflation rate is
projected at 8% this year.
• Compute the NPV and real cost of capital.
63
 Complex Investment Problems
• How shall choice be made between investments with
different lives?
• Should a firm make investment now, or should it wait
and invest later?
• When should an existing asset be replaced?
• How shall choice be made between investments
under capital rationing?

64
 Projects with Different Lives
• The choice between projects which have different lives should
be made by evaluating them for equal periods of time.
• Example: A firm has to choose between two projects X and Y,
which are designed differently, but perform essentially the same
function. Cash flows of projects are in real terms and the real
discount rate is 10 per cent. The present value of costs are
shown below:( Rs.120,000 Initial outlay and operating cash
expenses of Rs.30,000 per year for 4 years).

65
 Projects with Different Lives
• Project X has 4-year life while Project Y has 2-year
life. Project Y will be replicated to compare it with
Project X. Project Y costs more than project X.

66
Annual Equivalent Value (AEV) Method

• The method for handling the choice of the mutually exclusive

projects with different lives, as discussed in last slide, can
become quite cumbersome if the projects’ lives are very long.

• We can calculate the annual equivalent value (AEV) of cash

flows of each project. We shall select the project that has lower
annual equivalent cost.

NPV
AEV 
Annuity factor

67
 AEV: Example
• In the earlier example, the present value of cash flows of X is Rs
215,100. You can divide Rs 215,100 by a 4-year present value
factor for an annuity of Rs 1 at 10 per cent (3.1699) to obtain
AEV. Similarly, AEV for Y can be calculated. Y is more costly.

NPV
AEVProject X =
Annuity factor
215,100
= = Rs 67,857
3.1699
129, 420
AEVProject Y = = Rs 74,572
1.7355
68
 AEV for Perpetuities
• When we assume that projects can be replicated at
constant scale indefinitely, we imply that an annuity is
paid at the end of every n years starting from the first
period.
 (1  k ) n 
NPV (NPVn )   n 
 (1  k )  1 
where NPV¥ is the present value of the investment
indefinitely, NPVn is the present value of the investment
for the original life, n and k is the opportunity cost of
capital.

69
 Nominal Cash Flows and Annual
Equivalent Value
• Continue with earlier example. Let us assume expected inflation of
4% . The real cash flows of X and Y can be converted into nominal
cash flow (as shown below) and the real discount rate into nominal
discount rate: (1.04) x(1.10) -1=0.144. Notice that the ranking of
projects changes at higher inflation rate of 15%. Thus, the choice
should be based on real AEV.

70
Inflation and Annual Equivalent Value
 Investment Timing and Duration
• The rule is straightforward: undertake the
project at that point of time, which maximizes
the NPV.

71
 Replacement of an Existing Asset
• Replacement decisions should be governed by
the economics and necessity considerations.

• An equipment or asset should be replaced

whenever a more economic alternative is
available.

72
 Example
• A company is operating equipment, which is expected to
produce net cash inflows of Rs 4,000, Rs 3,000 and Rs 2,000
respectively for next 3 years. A design, which is considered to
be a technological improvement and more efficient to
operate, has appeared in the market. It is expected that the
new machine will cost Rs 12,000 and will provide net cash
inflow of Rs 6,000 a year for 5 years. What should the
company do? Assume 12 per cent discount rate.

73
 Example
• The correct method of analysis is to compare the annual
equivalent value (AEV) of the old and new equipments as given
below.
• A chain of new machines is equivalent to an annuity of Rs 9,630
 3.605 = Rs 2,671 a year for the life of the chain. The existing
machine is still capable of providing an annuity of: Rs 7,390 
2.402 = Rs 3,076. So long as the existing machine generates a
cash inflow of more than Rs 2,671 there does not seem to be an
economic justification for replacing it.

74
 Exercise
Consider the following cash flows of the three independent projects for ABC Ltd. Assume the
discount rate for the company is 12 percent. Further, the company has only Rs.20 million to
invest in new projects this year.

Year Net Cash Flows (in Rs millions)

A B C
0 -80 -120 -200
1 110 100 180
2 75 250 320
3 25 200 200

You are required to;

i. Find the net present value (NPV) for each project.
ii. Internal Rate of Return of each project.
iii. Calculate profitability index for each project.
iv. Based on your findings in (i), (ii) and (iii), which project would you recommend to
the CEO of the company?
75
 Example
• X ltd considering two machines to replace an old
machine. Machine A has a life of 10 years will cost
Rs.24,500/- and will produce net cash saving of
Rs.4800/- per year. Machine B has an expected life of
5 years will cost Rs.20,000/- and will produce net
cash savings in operating costs of Rs.6000/- per year.
Company’s cost of capital is 14%.
Thank You

77