Last month, Lloyd's Systems analyzed the project whose cash flows are shown below. However, before the...
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Last month, Lloyd's Systems 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? Note that a project's projected NPV can be negative, in which case it should be rejected. Old WACC: Year Cash flows 10.00% $38.48 $40.70 $37.00 $44.03 $32.19 0 1 New WACC: -$1,000 $410 2 $410 8.00% 3 $410 Last month, Lloyd's Systems 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? Note that a project's projected NPV can be negative, in which case it should be rejected. Old WACC: Year Cash flows 10.00% $38.48 $40.70 $37.00 $44.03 $32.19 0 1 New WACC: -$1,000 $410 2 $410 8.00% 3 $410
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Old WACC 10 Year CashFlows PVF 10 PV of Cashflow 0 1000 1 10... View the full answer
Related Book For
Managerial Accounting Creating Value in a Dynamic Business Environment
ISBN: 978-0078025662
10th edition
Authors: Ronald Hilton, David Platt
Posted Date:
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