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FIN-E2 - Value a project before arranging its funding

  • Situation: A project pays 1,000 now and returns 600 at the end of each of two years. These are complete incremental after-tax operating cash flows, with no terminal value.
  • Question: Does the project add financial value at a matching annual required return of 10%?
  • First useful result or blocker: FIN.6 gives NPV 41.32 on these grounds. This completes the stated value calculation; it does not provide the initial 1,000.
  • Start with: FIN.6. Use FIN.5 if the required return is unresolved and FIN.2 if the next question is payment capacity.
  • Stop or return: Return when cash, timing, risk basis or a competing capital use changes the answer.