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Author Question: Last month, Smith Systems Inc. decided to accept the project whose cash flows are shown below. ... (Read 6 times)

madimontg

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on: Aug 7, 2023

Question 1

Johnson Enterprises is considering a project that has the following cash flow and WACC data. What is the project’s NPV?

WACC:11%     
Year:

0

1

2

3

4

Cash flows:

–$1,000

$390

$390

$390

$390


◦

$193.78


◦

$197.98


◦

$201.45


◦

$209.95



Question 2

Last month, Smith Systems Inc. decided to accept the project whose cash flows are shown below. However, before actually starting the project, the Bank of Canada took actions that lowered interest rates and therefore Smith’s WACC. By how much did the change in the WACC affect the project’s forecasted NPV? Assume that the Bank of Canada’s action does not affect the cash flows.

​

​

New WACC:  9%     Old WACC:12%

Year:              0              1                  2                     3

Cash flows:    –$1,200   $600            $600               $600


​


◦

$72.18


◦

$75.19


◦

$77.68


◦

$79.69

Financial Management: Theory and Practice ¦ Brigham, Ehrhardt, Gessaroli, Nason ¦ 4th Edition
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Marked as best answer by madimontg on Aug 7, 2023

aublw

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Reply #1 on: Aug 7, 2023
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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madimontg

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Reply 2 on: Aug 7, 2023
Thanks for the timely response, appreciate it

LegendaryAnswers

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Reply 3 on: Yesterday
Excellent

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