Corporate Finance You are an analyst in the Finance department at a conglomerate, where the CFO believes theCost of Equity is 10% and the WACC is 7%. A project has been proposed to create a new businessline, and your manager asks you to calculate the NPV assuming the project is funded entirely byequity. Should you discount the CF’s using a) 10%, b) 7% or c) do you need to figure out some otherrate to use?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 21P
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Corporate Finance

You are an analyst in the Finance department at a conglomerate, where the CFO believes the
Cost of Equity is 10% and the WACC is 7%. A project has been proposed to create a new business
line, and your manager asks you to calculate the NPV assuming the project is funded entirely by
equity. Should you discount the CF’s using a) 10%, b) 7% or c) do you need to figure out some other
rate to use? 

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