Question: Eye Vision Inc. recently analyzed the project whose cash flows are shown below. However, before Eye Vision decided to accept or reject the project, the
Eye Vision Inc. recently analyzed the project whose cash flows are shown below. However, before Eye Vision decided to accept or reject the project, the Federal Reserve took actions that changed interest rates and therefore the firm's WACC. The Fed's action did not affect the forecasted cash flows. Old WACC = 8% Year 0 New WACC = 9.75% -$-15,000 Year 1 $6,000 Year 2 $6,100 Year 3 $6,200 By how much did the change in the WACC affect the project's forecasted NPV? Note that a project's projected NPV can be negative, in which case it should be rejected.
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