By how much did the change in wacc affect projects npv

Assignment Help Financial Econometrics
Reference no: EM13335504

The Seattle Corporation has been presented with an investment opportunity which will yield end-of-year cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10. This investment will cost the firm $150,000 today, and the firm's cost of capital is 10 percent. What is the NPV for this investment? Now assume the Federal Reserve takes actions which increases interest rates and therefore impacts the firm's WACC. If the new WACC for Seattle Corporation becomes 14 percent By how much did the change in the WACC affect the project's forecasted NPV? That is, find the ?NPV resulting from the Federal Reserve actions.

Reference no: EM13335504

Questions Cloud

Calculate the weight of the heaviest bear : The density of ice is 917 kg/m3, and the density of sea water is 1025 kg/m3. What is the weight of the heaviest bear
Describe how you created the conceptual and process : Describe how you created the conceptual and process view for all four (4) diagrams. In the description, be sure to provide a justification for each key decision in the design.
Why might a profitable motel shut down in the long run if : Why might a profitable motel shut down in the long run if the land on which it is located becomes extremly valuable due to surrounding economic development?
Find the speed of the explosive at the max height : An explosive is fired from the ground at an angle of 53.1 degrees and a speed of 30 m/s. what is the speed of the explosive at the max height
By how much did the change in wacc affect projects npv : The Seattle Corporation has been presented with an investment opportunity which will yield end-of-year cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10.
What command-and-control policy might the landlord impose : Pedro loves playing rock music at high volumes. Mario loves opera and hates rock. Unfortunately, they are next door neighbors in an apartment building with paper thin walls.
Examine the effect of changes in the variable cost : Examine the effect of changes in the variable cost / fixed cost structure of the company on cost-volume analysis decisions by managers.
Suppose the economy has the following relationships in the : Suppose the Economy has the following relationships in the Goods Market?
Determine the original speed of the bullet : A 10.4-g bullet is fired into a stationary block of wood having mass m = 5.03 kg. determine the original speed of the bullet

Reviews

Write a Review

Financial Econometrics Questions & Answers

  What annual rate of interest must earn on the investment

Assume the total cost of a college education will be $250,000 when your child enters college in 17 years. You presently have $69,000 to invest.

  What amount of cash deposited at percent compounded annually

What amount of cash deposited today at 6.2-percent compounded annually will enable you to withdraw $8,098 at the end of each of the next 25-years

  What is the maximum capital budget that can be adopted

Net income for the previous year was $10 million, and it is expected to increase by 10 percent this year. The firm expects to maintain its dividend payout ratio of 40 percent on the 1 million shares of common stock outstanding.

  Find how long will alex take for him to pay off the loan

Alex Karev has taken out a $180,000 loan with an annual rate of 8 percent compounded monthly to pay off hospital bills from his wife Izzy's illness. If the most Alex can afford to pay is $3,500 per month,

  Cost benefit analysis

Australian Standard for lighting to firstly ensure compliance with the standard and compatibility with current fixtures (T8 linear fluorescent);

  What is the firms weighted average cost of capital

A firm has debt of $8.1, a leveraged firm value of $30.3, a pre-tax cost of debt of 9.2 percent, a cost of equity of 16.3 percent, and a tax rate of 34 percent.

  What are filers capital structure weights on market value

Miiler Manufacturing has 4 million shares of commonstock outstanding. The currentshare price is $76, and the book value per share is $5. Filer Manufacturing also has two bond issues outstanding.

  Determine what will the profit be after three months

A particular put is the option to sell stock at $40. It expires after three months and currently sells for $2 when the price of the stock is $42. a) If an investor buys the put, what will the profit be after three months if the price of the stock i..

  Determine what is wirelesss debt ratio of liabilities

wireless communications has a total asset turnover of 2.66, total liabilities of $1,004,162, and sales revenues of $7,025,000. What is Wireless's debt ratio

  How much net working capital does the firm need to fund

Dandee Lions, Inc., has a cash balance of $97,000, accounts payable of $212,000, inventory of $195,000, accounts receivable of $311,000, notes payable of $57,000, and accrued wages and taxes of $71,000.

  What is the present value of a 6-year annuity per year

What is the present value of a 6-year annuity of $2,250 per period in which payments come at the beginning of each period. The interest rate is 10 percent.

  What is the companys wacc at all the equity used

The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC if all the equity used is from retained earnings

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd