Question
1.Lasik Vision Inc. recently analyzed the project whose cash flows are shown below. However, before Lasik decided to accept or reject the project, the Federal
1.Lasik Vision Inc. recently analyzed the project whose cash flows are shown below. However, before Lasik decided to accept or reject the project, the Federal Reserve took actions that changed interest rates and therefore the firms WACC. The Feds action did not affect the forecasted cash flows. By how much did the change in the WACC affect the projects forecasted NPV? Note that a projects projected NPV can be negative, in which case it should be rejected.
| Old WACC: Year |
| 8.00% |
0 | New WACC: 11.25% 1 |
2 |
3 |
| Cash flows |
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| $1,000 | $410 | $410 | $410 |
| a. $59.03 |
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| b. $56.08 |
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| c. $53.27 |
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| d. $50.61 |
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| e. $48.08 |
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Monetary Policy Strategy
Authors: Frederic S. Mishkin
1st Edition
0262513374, 978-0262513371
