Purchase Solution

Change in NPV: Changed WACC

Not what you're looking for?

Ask Custom Question

The Federal Reserve recently shifted its monetary policy, causing Lasik Vision's WACC to change. Lasik had recently analyzed the project whose cash flows 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 cause the forecasted NPV 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.

New WACC: 7.00% Old WACC: 10.00%
Year: 0 1 2 3
Cash flows: -$1,000 $500 $520 $540

a. $72.27
b. $75.88
c. $79.68
d. $83.66
e. $87.85

Purchase this Solution
Solution Preview

We calculate the NPV at the two discount rates
NPV = PV of cash flows - initial ...

Purchase this Solution
Free BrainMass Quizzes
Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

View More Free Quizzes
Related BrainMass Solutions

  • Last month, Lloyd's Systems analyzed the project whose cash

    By how much did the change in the WACC affect the project's forecasted NPV? Note that a project's expected NPV can be negative, in which case it should be rejected.

  • Change WACC

    However, the CFO wants to reconsider this and all other proposed projects in view of the Fed action. How much did the changed WACC cause the forecasted NPV to change?

  • Lasik Vision's WACC: Differences in Forecasting

    However, the CFO wants to reconsider this and all other proposed projects in view of the Federal action. How much did the changed WACC cause the forecasted NPV to change?

  • By how much did the change in the WACC affect the project's forecasted NPV?

    This solution provides formatted calculations in the attached Excel file for finding out how much the forecasted NPV changed as a result of the change in WACC.

  • Change in NPV

    in NPV given a change in WACC

  • WACC

    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.

  • Federal Reserve shift in monetary policy

    However, the CFO wants to reconsider this and all other proposed projects in view of the Fed action. How much did the changed WACC cause the forecasted NPV to change? Assume that the Fed action will not affect the cash flows.

  • Forecasted NPV and WACC

    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.

  • Sensitivity Analysis of NPV

    572710 Sensitivity Analysis of NPV See the attached file. Sensitivity Analysis is an analysis of a change in NPV when a key input variable is changed and all other variables stay the same. Key variables can change a NPV (return) of a project.

View More Related Solutions