Question

What is the cost of debt (needed for WACC for a 5 year project) for a company thas no access to long-term debt markets but its bank has approached them interested on a mortgage over anew building, at a rate of 7.2% over the next 20 years (total value of mortgage 1 million); the bank is reluctant to extend its current credit line due to the company recent financial difficulties to repay its debt.

Answer 1

Also I am unsure how to compute the cash flow for this 5 year project. It refers to a joint-venture (50/50) during 5 years, starting operations immediately and I need to evaluate it only from the point of view of one of the partners. This partner will exit the venture after 5 years receiving a multiple of 3 times the cash-flow generated in the last year of joint operations, plus 50% of the equity at the end of 2017. No dividends would be paid-out during the life of the joint-venture. To start operations, both parties understood that an initial joint equity injection of 3 million each would be necessary.