1) What are the advantages and disadvantages of the existing financing options: 50% mortgage financing and 50-50 share ownership?
2) If Li requires a rate of return of 6% on equity investment; what is the cost of capital of the project if she decides to keep a capital structure of 50-50?
3) What are the following financial ratios on both financing options, considering the three case scenarios, and no growth?
a. Net Income
b. Total Cash Flows
d. Accounting and Financial Break-even Points
e. Payback Period
4) What should be Li’s decision on this project?
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