A home goods company is considering toping a new line of kitchen appliances. It uses a weighted average cost of capital (WACC) of 12% to evaluate the net present value (NPV) of all new projects it considers. The forecasted internal rate of return (IRR) for this new line of kitchen appliances is 15%. Of the following, which response best explains whether the company should make the investment in the new line? It should not because 15% is not a high level for IRR It should because 12% is a very positive WACC It should not because the WACC of 12% is below the 15% IRR It should because the IRR is higher than the WACC and thus the NPV would be positive

A home goods company is considering toping a new line of kitchen appliances. It uses a weighted average cost of capital (WACC) of 12% to evaluate the net present value (NPV) of all new projects it considers. The forecasted internal rate of return (IRR) for this new line of kitchen appliances is 15%. Of the following, which response best explains whether the company should make the investment in the new line? It should not because 15% is not a high level for IRR It should because 12% is a very positive WACC It should not because the WACC of 12% is below the 15% IRR It should because the IRR is higher than the WACC and thus the NPV would be positive

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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