The President of the Company Is Not Convinced That the Interest

Essay

The president of the company is not convinced that the interest expense should be excluded from the calculation of the net present value. He points out that, "Interest is a cash flow. You are supposed to discount cash flows. We borrowed money to completely finance this project. Why not discount interest expenditures?" The president is so convinced that he asks you, the controller, to calculate the net present value including the interest expense.
How can you adjust the net present value analysis to compensate for the inclusion of the interest expense?