You and your team analyzed project XYZ whose cash flows are shown below. However,before the decision to accept or reject the project, the Federal Reserve took actions thatchanged interest rates and therefore the firm's WACC. The Fed's action did not affect theforecasted cash flows. By how much did the change in the WACC affect project XYZ'Sforecasted NPV?Old WACC: 10.00%New WACC: 8.00%Year0123Cash flows -$1,000 $410$410$410$37.00$38.48O $32.19O $40.70$44.03

NPV will be computed using excel's NPV function.The syntax is: NPV(rate, value 1, value 2......)Rate…

Answered: You and your team analyzed project XYZ…

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 1 2 3 Cash flows -$1,000 $410 $410 $410 a. -$32.50 O b. -$30.55 O c. -$28.60 O d. -$29.25 O e. -$34.12
The Federal Reserve recently shifted its monetary policy causing Lasik Vision’s WACC to change. Lasik had recently analyzed the project whose cash flow are shown below. However, the CFO wants to reconsider this and all other proposed projects in view of the Fed action. How much did the changed WACC caused forecasted and NVP to change? assume that the Fed action does not affect the cash flows and note that a project’s projected NPV can be negative, in which case it should be rejected. (Hint: you need to find the NPVs under WACC = 7% and 10%). New WACC= 7% Old WACC= 10% Year: 0 1 2 3 Cash flows: ($1,000) $500 $520 $540
Malholtra Inc. is considering a project that has the following cash flow and WACC data. What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected. WACC: Year Cash flows a. 3.93% b. 10.28% c. 7.68% d. 8.61% O O e. 4.17% 10.00% 0 -$1,200 1 $320 2 $340 3 $360 4 $380
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Galaxy Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the shorter payback, some value may be forgone. How much value will be lost in this instance? Note that under some conditions choosing projects on the basis of the shorter payback will not cause value to be lost. WACC: 11.00% Year CFS CFL O $53.31 O $3.50 O $63.57 O $43.16 0 -$950 -$2,100 1 2 $500 $800 $400 $800 3 $0 $800 4 $0 $1,000
Manshukh
H5. Discuss the following statement: If a firm has only independent projects, a constant WACC, and projects with normal cash flows, the NPV and IRR methods will always lead to identical capital budgeting decisions. What does this imply about the choice between IRR and NPV? If each of the assumptions were changed (one by one), how would your answer change? Explain with details
I'm not sure if I am doing this right.
WorldTrans is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the shorter payback, some value may be forgone. How much value will be lost in this instance? Note that under some conditions choosing projects on the basis of the shorter payback will not cause value to be lost. WACC: 14.25% 0 1 2 3 4 CFS -$950 $500 $800 $0 $0 CFL -$2,100 $400 $800 $800 $1,000 Group of answer choices $127.87 $95.90 $93.62 $116.46 $0.00
a firm wants to start a project. A team of financial analysts estimated the following cash flows; Year Cash flow 0 -$100000 1 $55000 2 $43000 3 $45000 1. Suppose the discount rate (interest rate) is 12%, what is the NPV? 2. Suppose that the discount rate (interest rate) is 12%, according to the calculation of NPV we should? 3. the payback period is? 4. Based on the payback period calculations and if the cut off point is 2 years, the project should? 5. Suppose that the discount rate (interest rate) is 12%, the profitability index (PI) is? 6. suppose that the discount rate (interest rate) is 12% based on the PI calculation, the project should?
5. Froogle Enterprises is evaluating an unusual investment project. What makes the project unusual is the stream of cash inflows and outflows shown in the following table: a. Calculate the investment’s net present value at each of the following discount rates: 0%, 5%, 10%, 15%, 20%, 25%, 30%, 35%. b. What does your answer to part b tell you about this project’s IRR? c. Should Froogle invest in this project if its cost of capital is 5%? What if the cost of capital is 15%? d. In general, when faced with a project like this, how should a firm decide whether to invest in the project or reject it?
Tuttle Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that if a project's projected NPV is negative, it should be rejected. WACC: Year Cash flows 084.03 064.70 059.49 082.54 074.36 11.50% 0 -$1,000 1 $350 2 $350 3 $350 $350

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