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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Last month, Company Z analyzed a project whose cash flows are shown below. However, before the decision to accept or reject the project, the Federal Reserve took actions that changed interest rates (and, therefore, the firm's WACC). The Fed's actions did not affect the forecasted cash flows. By how much did the change in the WACC affect the project's forecasted NPV? Old WACC 10.00% New WACC 7.00% Year 0 1 2 3 Cash Flow -1,100 600 600 600 Group of answer choices 115.47 65.98 103.10 0 (no change in NPV) 82.48
Last month, Lloyd’s Systems analyzed the project whose cash flows are shown below. However, before the decision 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: 10.00% New WACC: 9.50% Year 0 1 2 3 Cash flows -$1,000 $410 $410 $410 Select one: a. $9.04 b. $10.13 c. $11.12 d. $10.22 e. $10.85
Last month, Lloyd's Systems analyzed the project whose cash flows are shown below. However, before the decision 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: 10.00% New WACC: 9.50% Year 0 1 2 3 Cash flows -$1,000 $410 $410 $410
Last month, Lloyd's Systems analyzed the project whose cash flows are shown below. However, before the decision 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: Year Cash flows. a. $14.28 b. $7.58 c. $13.50 d. $20.10 e. $8.05 10.00% 0 -$1,000 1 $430 New WACC: 2 $430 9.25% 3 $430 Chank My Work (1 remaining)
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
A company recently analyzed the project whose cash flows are shown below. However, before the company 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. The old WACC is 8.00% and the new WACC is 9.75% Year 0. 1 3. Cash -$1,000 $410 $410 $410 flows 2.
Last week, Giant Inc analyzed the project whose cash flows are shown below. However, before the decision to accept or reject the project, the Federal Reserve took actions that changed interest rates and therefore the firm’s cost of capital from 8% to 10%. The Fed’s action did not affect the forecasted cash flows. By how much did the change in the cost of capital affect the project’s forecasted NPV? Year 0 1 2 3 Cash Flows -$500 $325 $325 $325 -$29.33 b. -$78.93 c. -$337.56 d. -$308.23 e. Cannot be determined Ginger Inc is considering a project that has the following cash flow data. What is the project’s MIRR, if the cost of capital is 14%? Year 0 1 2 3 Cash Flows -$500 $300 -$100 $900 9.22% b. 38.90% c. 29.06% d. 41.08% e. 30.76%
None
Question 10 (2.25 points) Final Clearance Inc. recently analyzed the project whose cash flows are shown below. However, before Finals 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% Year Cash flows $102.54 -$93.64 -$102.54 $0.00 $93.64 0 -$11,000 1 New WACC: 7.50% $4,200 2 $4,300 3 $4,500
4) First Capital recently evaluated a project and calculated its cash flows, which are presented below. However, after the analysis, the Federal Reserve made changes to the interest rates that affected the company's weighted average cost of capital (WACC), before the final decision to accept or reject the project was made. It's important to note that the Federal Reserve's actions didn't impact the projected cash flows of the project. What is the impact of the WACC change on the project's estimated net present value (NPV)? Keep in mind that if the project's projected NPV is negative, it should be rejected. Old WACC: 10.00% Year Cash flows 0 -$1,000 New WACC: 11.25% 1 $410 2 $410 3 $410
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

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