When the internal rate of return for the project exceeds what you would receive by lending, you will maximize wealth by making the investment, transforming current resources into future resources via direct investment rather than lending. NPV and IRR calculation are certainly highly educated deduction and invaluable tools when assessing return and risk factors associated with a project. Leveraging and debt structure are also major concerns when undertaking not only any capital investments, but in maintaining the structure and longevity of the organization as a whole. A project that has most of its cash flows in the early years, the NPV will not decline very much if the cost of capital increases, but if a project whose cash flows come in the later years it will be severely penalized by high capital costs. Similar to the risk imposed on long-term bonds and the fluctuation of interest rates. If cash flows remain unchanged and the cost of capital fluctuates, IRR can change. NPV assumes that cash flows are reinvested at the cost of capital whereas the IRR assumes reinvestment at the...

A general increase of 3% was added to the prior year to offset increasein costs as well as add increases to charges. The numbers are also adjusted for a 1.8% rate of inflation
Free Cash Flow equals NOPAT (Net OPerating Costs after Taxes) minus total Operating Capital for the current year minus total operating Capital for the following year.

In their current stage of development it appear that ASM will be able to take on the project with minimal operational difficulties. This is given the fact that their repayment plan has them paying off the debit over an 11-year period beginning in 2003.

Works Cited

IRR and NPV Remain Chief Capital Budgeting Tools. 2003. Financial Executive's News 3.1: 2

IRR and NPV Remain Chief Capital Budgeting Tools. Financial Executive's News 3.1: 2 (2003)