Last month, Dow Chemical analyzed a project with an initial cash outflow of $1 million, and expected cash inflows of $455,000 per year in years 1, 2, and 3. However, before the decision to accept or reject the project, the Federal Reserve took monetary action that lowered interest rates and changed the firm's WACC from 10% to 9.5%. By how much did this change in the WACC affect the project's forecasted NPV? Your answer should be a positive number between 8132 and 12047, rounded to even dollars (although decimal places are okay), with no special characters.
Last month, Dow Chemical analyzed a project with an initial cash outflow of $1 million, and expected cash inflows of $455,000 per year in years 1, 2, and 3. However, before the decision to accept or reject the project, the Federal Reserve took monetary action that lowered interest rates and changed the firm's WACC from 10% to 9.5%. By how much did this change in the WACC affect the project's forecasted NPV? Your answer should be a positive number between 8132 and 12047, rounded to even dollars (although decimal places are okay), with no special characters.
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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Transcribed Image Text:Last month, Dow Chemical analyzed a project with an initial cash outflow of $1 million, and expected cash
inflows of $455,000 per year in years 1, 2, and 3. However, before the decision to accept or reject the
project, the Federal Reserve took monetary action that lowered interest rates and changed the firm's WACC
from 10% to 9.5%. By how much did this change in the WACC affect the project's forecasted NPV?
Your answer should be a positive number between 8132 and 12047, rounded to even dollars (although
decimal places are okay), with no special characters.
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