solved In this course project, we return to the 5789 Project.

In this course project, we return to the 5789 Project. Earlier, we established the project’s feasibility and evaluated two loans for the project, sizing the loan using an LTC Ratio, a DCR Ratio, and a Debt Yield. The two loans include:A Base Case loan with twenty-year amortization and a 4.65% interest rate; using the three criteria, this loan was constrained by the DCR Ratio and sized to $15,875,057.An Optional Terms loan with thirty-year amortization and a 4.75% interest rate; using the three criteria, this loan was constrained by the LTC Ratio and sized to $17,938,400.The following table provides the specific details of the Base Case loan and Optional Terms loan for the 5789 Project.5789 ProjectOptional Terms Loan50% LTCBase Case Loan 44.25% LTCAmount Borrowed$17,938,400$15,875,057Interest Rate4.75%4.65%Amortization30 years20 yearsECB4.89%4.76%DCR in Year 32.512.31RMB at End of Year 5$16,413,320$13,164,980Project Cost$35,876,800$35,876,800Net Sale Proceeds in Year 5$41,490,258$41,490,258Overall Project IRR10.16%10.16%Equity Required$18,072,938$20,120,806Before-Tax Equity Reversion$25,076,939$28,325,279Before-Tax IRR14.63%13.67%After-Tax Equity Reversion$23,606,023$26,308,363After-Tax IRR11.34%10.49%In the end, the developer decided to use the Optional Terms loan, which produces higher equity IRR’s for the investor than the Base Case loan. However, the Optional Terms loan has a higher effective cost of borrowing (ECB) and a higher remaining balance, and thus produces lower before- and after-tax reversions than the Base Case loan.Interestingly, due to the longer amortization term, the Optional Terms loan has a higher DCR than the Base Case loan, indicating lower risk of a default if the project does not perform as expected. In addition, the Optional Terms loan requires a lower equity investment, which could be positive or negative, depending on the investor’s capital constraintsBased on the information above, answer the following questions to complete this project:Characterize the risks that the investor is taking under the Optional Terms financing scenario relative to the Base Case scenario.Indicate whether you feel that the increased equity IRRs adequately compensate the investor for these risks.In addition, indicate what other metrics or information you would need to complete your evaluation of the Optional Terms loan vs. the Base Case loan.