Investment appraisal

Cost of finance is incorporated in the discount rate which we use to calculate for present valule of cash flow. Lets have a example on the scenerio which you establish. assumed machine is finance fully from bank loan and the bank interest rate is 22% and that ultimately becomes your discount rate. After taking account interest and loan repayment you will have following NPV.

Loan Y1 RtLoans = 300.0
Interest @ 22% 66.0
Payment -200.0
Balance at Y1 166.0
Interest @ 22% 36.5
Payment -200.0
Balance at Y2 2.5
Discount @ 0.6718 1.7
NPV 1.7
Now furhter reconcile the same via making following table:

Year 01 Year 02
Cash Inflows 1,000 1,000

Cost of Maching (300)
Marketing expense (300) (300)
Other expense to sell (500) (500)
Net Inflow 200 200
Discount Factor 0.8196 0.67186
163.9 134.4
NPV -1.7

So, you dont need to incorprate any interest payment or principle repayment in cash outflows.

Unfortunately or fortunately :)

your boyfriend has signed up with a company that still manufacturers known harmful ingredients in their personal care and beauty products. You should be happy that you are not using them. It is very difficult to convince MLM’rs about the dangers of the chemicals in their products., they all feel their company is behind them and would never allow known carcinogens in any of their products.

If your boyfriend is truly involved with Amway and wants to try to make it as a business, you are better off without him and find someone else who thinks more on the healthy tract. Amway products are not healthy, read the facts on the chemicals.

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