Review the video and financial model shown in the links above. Play with the model and change the values.
Calculate net present value of future cash flows for both of the alternatives based on your adjusted financial model.
Write a 1,000 – 1,200 word paper. Include the following:
• Change the model variables. The changes should include the assumptions below.
• Assume the bank interest rate would be prime + 2%. (as of first day of class)
• Assume the mortgage interest rate will be 10-year US Treasury rate +2.5% (as of first day of class)
• Assume that 10% of the inventory has become a write-off due to obsolecense.
• Describe the cost of capital in your own words, in plain English.
• Describe how the cost of capital affected the attractiveness of each alternative.
• Present your NPV calculations for each alternative.
Format your paper consistent with APA guidelines.