The WACC affect the project forecasted NPV

Assignment Help Financial Management

Reference no: EM132039073

1. Project K has an initial cost of $81,996, and its expected net cash inflows are $12,250 per year for 10 years. The firm has a WACC of 7 percent, and Project K’s risk would be similar to that of the firm’s existing assets. Calculate the discounted payback period of Project K. Selected Answer: Incorrecta. 10.00 years

a. 10.00 years Correctb. 9.35 years c. 9.45 years d. 9.75 years e. 9.00 years

2. 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: 10.00% New WACC: 9.50% Year 0 1 2 3 Cash flows -$1,000 $410 $410 $410

a. 0$11.12 b. 0$10.13 c. 0$10.22 d. 0$9.04 e. 0$10.85

Reference no: EM132039073

Questions Cloud

Estimate of the value of nike stock : what would have been your estimate of the value of Nike stock in early 2013?

Considering purchase of arras manufacturing : Schultz Industries is considering the purchase of Arras Manufacturing. What is the maximum price per share Schultz should pay for Arras?

What is initial investment outlay for spectrometer : What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow?

What does the assumption of no market frictions mean : What does the assumption of no market frictions mean? Is this assumption true in current commodity markets?

The WACC affect the project forecasted NPV : 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?

What portion of its net income is firm expected to pay out : What portion of its net income is the firm expected to pay out as dividends?

What is the equipment after-tax salvage value : Karsted can sell the used equipment today for $6.75 million, and its tax rate is 35%. What is the equipment's after-tax salvage value?

What is cost of preferred stock-including flotation : What is the cost of the preferred stock, including flotation?

What would be cost of new equity : New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of new equity?

User Account

All Pages