Fairfax pizza has a weighted-average cost of capital of 916, Ask an Expert

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Fairfax Pizza has a weighted-average cost of capital of 9.16 percent and is evaluating two projects: A and B. Project A has an initial investment of 4,388 dollars today and an expected cash flow of 7,503 dollars in 8 years. Project A is considered more risky than an average-risk project at Fairfax Pizza, such that the appropriate discount rate for it is 2.13 percentage points different than the discount rate used for an average-risk project at Fairfax Pizza. The internal rate of return for project A is 6.935 percent. Project B has an initial investment of 4,004 dollars today and an expected cash flow of 6,206 dollars in 3 years. Project B is considered less risky than an average-risk project at Fairfax Pizza, such that the appropriate discount rate for it is 1.42 percentage points different than the discount rate used for an average-risk project at Fairfax Pizza. The internal rate of return for project B is 15.728 percent. What is The NPV of project A plus the NPV of project B?

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Financial Management, Finance

Category:- Financial Management
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