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Author Question: The Bank of Canada recently shifted its monetary policy, causing Lasik Visions WACC to change. Lasik ... (Read 65 times)

rubiosusy7

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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


2.54 years


3.16 years


3.89 years


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



$72.03


$75.66


$79.57


$83.45



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Marked as best answer by rubiosusy7 on Aug 7, 2023

hariet5

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rubiosusy7

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


LVPMS

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Reply 3 on: Yesterday
Great answer, keep it coming :)

 

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