This determines if the scenario is a negative-NPV project.
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The treasurer of a large firm is considering investing $50 million in 10-year Treasury otes that yield 8.5%. The firm's WACC is 15%. Is this a negative-NPV project?
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Solution Summary
The solution determines if the scenario provided is a negative-NPV project.
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NO, it's not a negative NPV based on the circumstances given. The first indication where we see that it's not a negative NPV is because the firm is investing in treasury notes, which are extremely low risk. Other investments would be much higher in risk. The WACC at 15% would be used for a typical project that the firm undertakes, but because this is a low risk investment, the firm could not ...
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