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Last month, a company decided to accept the project whose cash flows are shown below. However, before actually starting the project, the Federal Reserve took actions that lowered interest rates and therefore the firm's WACC. By how much did the change in the WACC affect the project's forecasted NPV? That is, find the ΔNPV resulting from the Federal Reserve actions.

New WACC = 8% Old WACC = 11%

Year Cash Flows

0 -$1,000

1 500

2 500

3 500

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M944928

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