Change in NPV
Not what you're looking for?
3. 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: 11.25%
Year 0 1 2 3
Cash flows -$1,000 $410 $410 $410
-$20.04
-$25.11
-$20.49
-$17.84
-$22.03
Purchase this Solution
Solution Summary
The solution explains how to calculate the change in NPV given a change in WACC
Solution Preview
We calculate the NPV using the two WACC
NPV = PV of cash flows - initial ...
Purchase this Solution
Free BrainMass Quizzes
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Operations Management
This quiz tests a student's knowledge about Operations Management
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.