Author Question: The Bank of Canada recently shifted its monetary policy, causing Lasik Visions WACC to change. Lasik ... (Read 47 times)

rubiosusy7 · **on:** Aug 7, 2023

Question 1

Stewart Associates is considering a project that has the following cash flow data. What is the project’s payback?

Year:	0	1	2	3	4	5
Cash flows:	–$1,300	$400	$410	$420	$430	$440

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2.54 years

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3.16 years

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3.89 years

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4.21 years

Question 2

The Bank of Canada 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 Bank of Canada’s action. How much did the changed WACC cause the forecasted NPV to change? Assume that the Bank of Canada’s action does not affect the cash flows.

New WACC: 8% Old WACC: 11%

Year: 0 1 2 3

Cash flows: –$1,200 $600 $620 $640

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$72.03

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$75.66

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$79.57

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$83.45

hariet5 · **Reply #1 on:** Aug 7, 2023

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