Apply WACC in NPV.   Brawn Blenders has the following incremental cash flow for its new​ project:   Category T0 T1 T2 T3   Investment −​$4,886,000           Net working capital change −​$359,000       ​$359,000   Operating cash flow     ​$1,731,000 ​$1,731,000 ​$1,731,000   Salvage         ​$439,000     Should Brawn accept or reject this project at an adjusted WACC of 9.71​%, 11.71​%, or 13.71​%? Should Brawn accept or reject this project at an adjusted WACC of 9.71​%?   ​(Select the best​ response.)     A. The project should be accepted because the NPV is positive.  The benefits exceed the costs in today's dollars.   B. The project should be rejected because the NPV is negative.  The costs exceed the benefits in today's dollars.

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
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Apply WACC in
NPV.
  Brawn Blenders has the following incremental cash flow for its new​ project:
 
Category
T0
T1
T2
T3
 
Investment
−​$4,886,000
 
 
 
 
 
Net working capital change
−​$359,000
 
 
 
​$359,000
 
Operating cash flow
 
 
​$1,731,000
​$1,731,000
​$1,731,000
 
Salvage
 
 
 
 
​$439,000
 
 
Should Brawn accept or reject this project at an adjusted WACC of
9.71​%,
11.71​%,
or
13.71​%?
Should Brawn accept or reject this project at an adjusted WACC of
9.71​%?
  ​(Select the best​ response.)
 
 
A.
The project should be accepted because the NPV is positive.  The benefits exceed the costs in today's dollars.
 
B.
The project should be rejected because the NPV is negative.  The costs exceed the benefits in today's dollars.
 
 

 

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