Question: A company is considering project whose cash flows are shown below. However, before the decision took place, the Federal Reserve increased interest rates and therefore

A company is considering project whose cash flows are shown below. However, before the decision took place, the Federal Reserve increased interest rates and therefore the firm's discount rate. Calculate the NPVs before and after the rate increase. Calculate the IRRs before and after the rate increase. Should the project be accepted? Why or why not?

Previous rate: 13.69% New rate: 14.10%

Year 0 1 2 3 4

Cash flows -2,356 1,587 1,111 -489 987

($ millions)

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