Question: Last month, ABC Inc. analyzed the project whose cash flows are shown below. However, before the decision to accept or reject the project, the Federal
Last month, ABC Inc. analyzed the project whose cash flows are shown below. However, before the decision 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. By how much did the change in the WACC affect the project's forecasted NPV? Hint: Use the new NPV minus the old NPV.
Keep the - sign if it's a negative change. Round to two decimal places.
| Old WACC: | 10.00% | New WACC: | 9.50% | |
| Year | 0 | 1 | 2 | 3 |
| Cash flows | -$1,000 | $410 | $410 | $410 |
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
