7. NPV profiles

An NPV profile plots a projects NPV at various costs of capital. A projects NPV profile is shown as follows. Identify the range of costs of capital that a firm would use to accept and reject this project.

Range A
Range B

ACCEPT OR REJCT?

The point at which the NPV profile intersects the horizontal axis represents the (WACC OR IRR)

NPV (Dollars) () 400 300 200 A 100 0 B -100 -200 0 2 4 6 8 4 6 8 10 12 14 10 12 14 16 18 20 COST OF CAPITAL (Percent)