Question 10 (2.25 points)Final Clearance Inc. recently analyzed the project whose cash flows are shown below. However, before Finals decidedto accept or reject the project, the Federal Reserve took actions that changed interest rates and therefore the firm'sWACC. The Fed's action did not affect the forecasted cash flows. By how much did the change in the WACC affect theproject's forecasted NPV? Note that a project's projected NPV can be negative, in which case it should be rejected.Old WACC: 8.00%YearCash flows$102.54-$93.64-$102.54$0.00$93.640-$11,0001New WACC: 7.50%$4,2002$4,3003$4,500

NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Answered: Question 10 (2.25 points) Final…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Lasik Vision Inc. recently analyzed the project whose cash flows are shown below. However, before Lasik decided 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: 8.00% New WACC: 9.75% Year 0 1 2 3 Cash flows -$1,000 $410 $410 $410 Select one: a. -$29.25 b. -$34.12 c. -$28.60 d. -$32.50 e. -$30.55 Clear my choice
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